Petronas is the best example of Malay corporate success

petronas

Petroliam Nasional Bhd (Petronas) announced its 2008 annual results, with year ending (YE) 31 March 2009 with RM 264 Billion turnover and RM 89.4 Billion EBITDA. This is a really large contribution to the nation’s coffer, as RM 74 Billion was made as payout to Federal and relevant State Governments, in terms of income tax, dividends and royalties. Undoubtably, this is a very impressive performance considering the world market oil price is no longer hovering at USD 130 per barrel.

Bernama.com has the story:

June 25, 2009 15:07 PM

Petronas’ Revenue Up 18.4 Percent To RM264.2 Billion

KUALA LUMPUR, June 25 (Bernama) — Petroliam Nasional Bhd (Petronas) recorded another year of satisfactory performance for its financial year ended March 31, 2009, with an 18.4 percent increase in revenue to an all-time high of RM264.2 billion.

However, the group’s pre-tax profit fell 6.7 percent to RM89.1 billion while net profit declined 13.9 percent to RM52.5 billion.

At a press conference to announce the results, Petronas president and chief executive officer Tan Sri Hassan Marican said the stronger revenue was driven by higher sales volume and liquefied natural gas (LNG) prices.

The lower pre-tax profit, according to him, resulted from higher production and operating costs.

However, he said the drop was well within the decline recorded by major oil and gas companies which ranged between 6.4 and 25.7 percent.

Notwithstanding the lower profit, the group declared a total dividend of RM30 billion, which was 25 percent higher than the previous year.

Its total asset increased by 14.4 percent to RM388.1 billion from RM339.3 billion previously while shareholders’ funds rose by 15.1 percent to RM232.1 billion.

Despite the lower profit, Hassan said that Petronas continued to make higher payments to federal and state governments.

During the financial year, the group paid RM74.0 billion to governments, bringing the total payment to RM471.3 billion since its incorporation in 1974.

Of the RM74.0 billion payment for the year, RM67.8 billion went to the federal government, comprising RM30.0 billion of dividend, RM20.3 billion of petroleum income tax, RM9.1 billion of corporate income tax, RM2.2 billion of export duties and RM6.2 billion of royalty payment.

Another RM6.2 billion was paid in royalty payments to the state governments, with RM3.0 billion for Terengganu, RM2.3 billion for Sarawak and RM0.9 billion for Sabah.

The RM74.0 billion total payment to the governments represented 71.4 percent of Petronas’ pre-tax profit, royalty and export duty, with the group retaining only 21.1 percent of its profit during the year for reinvestment and the balance of 7.5 percent for foreign taxes and minority interests.

During the financial year, Petronas increased its capital expenditure to RM44.0 billion from RM37.6 billion previously.

As at Jan 1, 2009, Malaysia’s total hydrocarbon reserves rose to 20.18 billion barrels of oil equivalent (boe) from 20.13 billion boe last year as a result of ongoing exploration efforts and field growth activities.

International reserves increased by 9.6 percent to 6.84 billion boe, following a number of significant gas discoveries in Turkmenistan and Mozambique.

— BERNAMA

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The fact is that since its inception 35 years ago, Petronas has dished out more than RM 471 Billion, in the form of income tax, petroleum tax, dividends and royalties to the Federal and relevant State Governments. Of which RM 263 Billion was within the last six years. For YE 2008, RM 29.4 Billion was paid as income tax to the Federal Government, which is effectively 30% of RM 88.5 Billion 2009 expected collection by the Inland Revenue Board. Petronas global turnover of RM 264.2 Billion is actually 28% more than the Federal Government 2009  expected income. Accumulated asset of Petronas amounting to RM388 Billion, if which is taken at par value is inadvertently comparable to 38% of the market capitalisation of Bursa Malaysia. If in 2007 PM ‘Flip-Flop’ Dato’ Seri Abdullah Ahmad Badawi claimed that the Malaysian economy is calculated at RM 1 Trillion, then last year’s Petronas’s results meant that 26% of the nation’s GNP comprises from one corporation’s contribution.

malaysia-federal-government-budget-2009

At the helm of this success story is Tan Sri Hassan Merican. A chartered accountant by profession and former partner of a ‘big five’ firm, Hanafiah Raslan Mohamad, Hassan was brought in as a finance man and took over the CEOship from Tan Sri Azizan Zainal Abidin fourteen years ago. His stewardship provided clear strategic plans and initiatives, that moved  Petronas to be a global oil and gas company. Partnership and strategic alliance were formed and now, Petronas is able to compete with some its original ‘production sharing partners’, in very competitive international markets. Presently, with offices and operations in more than 64 countries, Petronas is the most respected and profitable state owned oil corporation. Not only ranked as the 95th largest corporation in the world in the renowned Fortune 500 list, Petronas is now regarded as one of the ‘New Seven Sisters’.

Petronas Dagangan Berhad, its downstream creature is now listed at Bursa Malaysia. Proud of posting over RM 800 million in profits, it has the largest network of petrol and diesel retail in Malaysia. The ‘Mesra’ convenient stores have now earned its place amongst Malaysian hearts.

Hassan Merican

Petronas not only successfully played the role as the nation’s largest ‘bread winner’. It also played role to propel the needs of the nation, which include ‘psychological bastion’ like being the highly respected super developer of KLCC and master developer of Putrajaya. Being the proud owner of the much sought after address in the KLCC complex, Petronas now calls the most prestigous and world renowned twin towers as its home. Petronas also successfully put Malaysia into the limelight of Formula 1 motorsport when it became a partner of world class racing team Sauber. Today, Petronas is a major sponsor for the BMW-Sauber team and Malay engineers have mastered some skill sets of the highly technical sporting event. Petronas acquired national shipping line MISC t synergise the logistic management of the produce and made a lot of money from operations. On top of that, Petronas also own, fund and run a highly respected private technical university, Universiti Teknologi Petronas.

kuala_lumpur_petronas_twin_towers_4

KLCC was officially dedicated on National Day, 1999. After 42 years of independence, the world’s tallest office complex is now home for the largest and most profitable Malaysian company, which is actually a Malay-run-state-owned corporation. In the dedication speech, Fourth Prime Minister Dato’ Seri Dr Mahathir Mohamad quipped, “Malaysians need to stand tall as other races of the world. KLCC is the ‘box’ that will help Malaysians stand the same level as others”. It was a demonstration of nation’s Vision 2020 policy to be a developed nation’s status by year 2020, is being geared up on the way. KLCC is Petronas’s way to announcing to the world, “We have arrived. We are here to stay, for a long time”. Its now a world renowned national icon.

Petronas success is not only a Malaysian success. It is a Malay corporate success. All of its board of directors and almost all of its executives and professionals are Malays. They do the strategic thinking, planning, negotiating and execution. The strategic partnerships forged, especially with bigger players were proven to be the key to all these success stories. These are those who originated from humble beginnings and most of them actually benefitted from the New Economic Policy (NEP), especially from the provisions of education and human capital development, which was implemented since 1971. Like the NEP, Petronas was formed during Tun Abdul Razak Hussein’s premiership (1970-1976).

Petronas’s role in making the NEP a success is best illustrated from the Vendor Development Program (VDP), which successfully nurtured many Malay companies to be suppliers, service providers and fabricators of the high technology induced and very competitive industry. Developed under the auspicious and close monitor of Fourth Prime Minister Tun Dr. Mahathir Mohamad, many former oil and gas Malay professionals found opportunities to nurture their entrepreneurism from Petronas’s VDP and now able to compete at regional and international markets. The recent concluded and highly successful Oil and Gas Asia 2009 showcased hundreds of such local talents. Some of these Malay owned and managed corporations even got listed.

Petronas grew termendously in size, quantity and quality of productivity under the premiership of Fourth Prime Minister Tun Dr. Mahathir Mohamad. It is by far the national pride and treasure.

It is imperative that Petronas continues to be managed by professionals and independent from the clutches of personalities, who have ulterior motives. This include politicians and political appointments into the BOD and top executive positions.

Published in: on June 25, 2009 at 22:51  Comments (71)