NOTE: All amounts expressed in millions, unless otherwise stated.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Comparable discussion on Material Changes in Results of Operations for the Year Ended December 31, 2021 vs. December 31, 2020.
Revenues, Cost of Sales and Gross Margins
The Group’s Revenues during the year 2021 increased to Php 132.284 billion, 68.9% higher compared to the Php 78.230 billion generated in 2020. This was mainly due to the increase in fuel prices. The average price of petroleum products was higher as a result of the 64.4% spike in the price of Dubai crude (benchmark crude of Asian refineries) average (YTD December 2021 vs 2020: USD 69.39/bbl. vs. USD 42.21/bbl.) which drove the prices of refined petroleum products down. This is in addition to the 9.7% growth in total volume sold for the comparative years (2021: 4,655 million liters vs. 2020: 4,245 million liters).
Of the 409 million liters incremental sales volume, 58.6% or 240 million liters came from the volume sold by its foreign-based subsidiaries; while the balance of 169.6 million liters net increase or 41% is from domestic operations.
Similarly, Cost of Sales and Services increased by 74.6%, from Php 71.254 billion in 2020 to Php 124.416 billion in 2021, principally attributable to the volume growth and surge in fuel prices.
As a result mainly of the increase in sales volume and increase in fuel prices, Gross Margin rose by 11.7% or Php 0.823 billion.
Operating Expenses, Non-operating Expenses, Recurring Income
The company’s Selling and Administrative Expenses amounted to Php 5.539 billion, 4.5% less than the Php 5.802 billion 2020 level. Considering the volume growth, opex per liter improved to Php 1.19 billion from Php 1.37 billion as the company continued to implement cost-effective programs aimed to streamline its processes and reduce cost.
On the other hand, Net Non-operating Charges of Php 3.514 billion was Php 2.106 billion more than the Php 1.408 billion incurred in 2020. Part of the 149.6% increase was the Php 1.662 billion increase in the finance cost as the working capital requirement brought about by the increase in fuel prices also increased, Php 0.044 billion increase in the recognized fair value gains on investment properties, Php 0.281 billion decrease in finance income, Php 0.075 billion decrease in the equity share in the JV income, and Php 0.132 billion decrease in other income.
Operating, Net, and Comprehensive Incomes
Because of the decrease in operating expenses, the 2021 Operating Income of Php 2.329 billion rose by 87.3% (Php 1.085 billion) compared to the 2020 Operating Income of Php 1.244 billion.
Due to the higher Net Non-operating Charges, the group incurred a Net Loss After Tax of Php 0.466 billion in 2021 vis-à vis the 2020 NIAT of Php 0.063 billion.
Meanwhile, the company recorded a Php 0.445 billion gain on revaluation of land which was 62.7% or Php 0.749 billion less than Php 1.194 billion recorded in 2020. The remeasurement of the post-employment defined benefit program also resulted in a gain of Php 0.017 billion in 2021, 127.0% better than Php 0.064 billion loss recognized in 2020. As such resulted to a Comprehensive Loss of Php 0.118 billion, 115.4% less than the Php 0.767 billion reported in 2020.
(As of December 31, 2021 versus December 31, 2020)
Consolidated resources as of December 31, 2021 stood at Php 85.598 billion, 3.7% higher than Php 82.532 billion level as of December 31, 2020. This was mainly due to the increase in fuel prices which resulted in higher input VAT. The increase is also due to the increase in property, plant, and equipment, although the capital expenditures spending was cut into only 30% versus 2020.
Cash and Cash Equivalents decreased by 15.3% (from Php 5.788 billion in December 31, 2020 to Php 4.903 billion as of December 31, 2021) as the company settled its loans, net of the proceeds coming from new loans availed.
Trade and Other Receivables increased by 5.4% (from Php 17.514 billion as of December 31, 2020 to Php 18.465 billion as of December 31, 2021) in relation to the increase in revenues, as a result of the increasing fuel prices.
Inventory was 4.7% higher at Php 4.992 billion as of December 31, 2021 compared to Php 4.769 billion as of December 31, 2020. This is the result of pressure coming from the fuel price increases in addition to the group’s effort to be efficient in its supplychain strategy.
As of December 30, 2021, the Group’s Property and Equipment, net of accumulated depreciation, increased to Php 33.914 billion versus the Php 32.708 billion as of December 31, 2020. The Php 1.207 billion or 3.7% growth represented the fair value appraisal of certain land properties of Duta leased by PLPI and carry-over expansion of the group.
Investment Properties was 15.3% higher at Php 0.687 billion as of December 31, 2021, from Php 0.596 billion as of December 31, 2020. The Php 0.091 million increment mainly pertained to the market revaluation of the company’s real estate properties in compliance with accounting standards.
Intangible Assets was 14.6% lower at Php 0.238 billion as of December 31, 2021, from Php 0.279 billion as of December 31, 2020 as a result of normal amortization.
Right of Use Assets increased to Php 1.010 billion as of December 31,2021 from Php 0.793 billion as of December 31,2020 resulting from normal depreciation and re opening of normal business operations after the ease of certain pandemic restrictions and mobility.
Investment in Joint Ventures was 7.8% higher at Php 1.763 billion as of December 31, 2021, from Php 1.635 billion as of December 31, 2020 inclusive of the cumulative increase from the equity share in the JVs net income, as well as the company’s share in its new Joint Venture Agreements.
Deferred Tax Asset was 105.6% higher at Php 1.017 billion as of December 31, 2021, from Php 0.494 billion as of December 31, 2020 coming from some subsidiaries reporting losses, thereby recognizing Income Tax Benefits.
Other Non-current Assets was 5.8% lower at Php 7.343 billion as of December 31, 2021, from Php 7.795 billion as of December 31, 2020 as some advances to suppliers for various goods and services in the prior were completed and delivered in 2021.
Interest-bearing Loans and Borrowings, both current and non-current of Php 46.137 billion as of December 31, 2021 decreased by 4.4% from Php 44.243 billion as of December 31, 2020, mainly due to the settlement of debts, net of new loan availments.
Trade and Other Payables increased by 70.1% from Php 9.107 billion as of December 31, 2020 to Php 15.494 billion as of December 31, 2021, related to the terms, timing, and increased value of purchases of petroleum products.
Deferred Tax Liabilities amounting to Php 0.917 billion as of December 30, 2021 decreased by 13.0% versus the Php 1.154 billion as of December 31, 2020, primarily related to the related fair value gains on land and investment properties.
Total Stockholders’ Equity decreased to Php 20.479 billion as of December 31, 2021 from Php 21.161 billion as of December 31, 2020, (by 3.2%). The increase in Capital Stock and Additional Paid-in Capital is a result of the ESOP availment of Php 0.026. The 15.4% decline in retained earnings came from the Php 0.466 billion net loss realized in 2021, payment of dividends on Preferred shares amounting to Php 0.589, partially offset by the increase in the Revaluation Reserves of Php 0.370 coming from the Other Comprehensive Income component of the Fair Value Gains of certain assets.
The Group’s key performance indicators and relevant ratios, and how they are computed are listed below:
2 - Interest Bearing Debts divided by Total stockholder’s equity
3 - Total stockholder’s equity (net of Preferred) divided by the total number of shares issued and outstanding
4 - Period or Year net income after tax divided by weighted average number of outstanding common shares
These key indicators were chosen to provide management with a measure of the Group’s financial strength (Current Ratio and Debt to Equity) and the Group’s ability to maximize the value of its stockholders’ investment in the Group (Net Book Value Per Share and Earnings Per Share). Likewise, these ratios are used to compare the Group’s performance with similar companies.
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