Analysis of Financial Condition

Financial Condition
(As of December 31, 2016 versus December 31, 2015)

Total resources of the Group as of December 31, 2016 stood at P– 26.538 billion, lower by 14% compared to the P– 30.926 billion as of December 31, 2015. This is mainly due to the sale of the subsidiaries, resulting in the deconsolidation of the carrying values of CSC and PPIPC.

Cash and cash equivalents this year increased by 43% from P– 1.632 billion in December 31, 2015 to – P 2.339 billion due to the net proceeds from sale of the subsidiaries and increased collections towards year-end net of payment of outstanding interes tbearing debt.

Trade and other receivables decreased by 19% from P– 10.810 billion as of December 31, 2015 to P– 8.789 billion as of December 31, 2016, due to the intensified collection of credit sales and other receivables and the deconsolidation of related receivables from the sale of the subsidiaries.

Inventories increased by 14% to P– 2.999 billion as of December 30, 2016 from P– 2.638 billion as of December 31, 2015, driven by the timing of arrival of importations. The Group targets to maintain an average of one month worth of inventory to ensure stable supply in retail stations and commercial/industrial clients. However, the actual level varies depending on the actual arrival dates of the fuel tankers.

Due from related parties increased to P– 1.507 billion as of December 2016 from P– 12.260 million as of December 2015, arising from the receivable balance from UDEVCO amounting to P– 50 million for the sale of PPIPC and from Chelsea Shipping Group Corp. amounting to P– 500 million for the sale of CSC. The change also included reclassification of accounts following the sale of the subsidiaries, CSC and PPIPC.

As of December 31, 2016, the Group’s property and equipment, net of accumulated depreciation, decreased to P–9.002 billion compared to P– 12.823 billion as of December 31, 2015 due to the sale of the subsidiaries that resulted in the deconsolidation of the related assets of CSC and PPIPC.

Loans and Borrowings, both current and non-current, decreased by 22% from P– 16.983 billion as of December 31, 2015 to P–13.184 billion as of December 31, 2016. The decrease of P– 3.799 billion was from the settlement of loans, which include the payments of interest-bearing debt from the proceeds of the sale of subsidiaries. Also contributing to the decline was the decrease in trade payables and the deconsolidation of the related loans and borrowings of CSC and PPIPC following the sale.

Trade and other payables decreased by 2% from P– 3.578 billion as of December 31, 2015 to P– 3.333 billion as of December 31, 2016 due to longer supplier credit term.

Total Stockholders’ Equity decreased to P– 9.762 billion as of December 31, 2016 from P– 10.023 billion as of December 31, 2015, resulting from the earnings generated in 2016 net of cash dividend declared and paid during the period for both common shares and preferred shares. The deconsolidation of CSC and PPIPC also contributed to the decrease.