BA 910 – Financial Management

May 4, 2019

PETRON CORPORATION
Financial Analysis

Prepared by:

Nadua, Neil Jonathan D.

Submitted to:

Prof. Miguel D. Soledad

 Petron Corporation
I. Company Overview
Petron Corporation (PCOR) was incorporated on December 22, 1966 as Esso Philippines,
Inc. (Esso) and later renamed to Petrophil Corporation (Petrophil) when the Philippine National
Oil Company (PNOC) acquired Esso. In 1985, Petrophil and Bataan Refinery Corporation were
merged, with Petrophil as the surviving corporation. Petrophil changed its corporate name to
the present one in 1988.
PCOR's principal business involves the refining of crude oil and the marketing and
distribution of refined petroleum products including gasoline, naphtha, LPG, diesel, jet fuel,
kerosene, and petrochemicals. The Company's refinery is located in Limay, Bataan with a crude
distillation capacity of 180,000 barrels a day. PCOR also manufactures lubricants and greases
through its blending plant in Pandacan, Manila.
PCOR has more than 2,400 retail service stations nationwide. The Company sells
gasoline, diesel, kerosene, and auto-LPG to motorists and to the public transport sector. The
Company also sells its LPG brands "Gasul" and "Fiesta" to households and other consumers
through a dealership network.
As of December 31, 2017, PCOR's direct subsidiaries include Petron Singapore Trading
Pte. Ltd.; Petron Global Limited; Petron Finance (Labuan) Limited; Petrochemical Asia (HK)
Limited; and Petron Oil & Gas Mauritius Ltd.

II. Financial Analysis of Petron Corporation

By Du Pont analysis, it can be observed that the return of sales in 2018 is the same as in
2014. From 2014 to 2018, it showed that there is no significant change its operational
efficiency. Asset Turnover Ratio in 2014 was 1.23 and in 2018 it increased to 1.56. This is due
to total assets in 2018 decreased by 57,007 million pesos and sales increased by 74,851 million
pesos. This shows that Petron Corp’s assets are being used efficiently to generate sales thereby
showing good marketing excellence. The equity multiplier in 2014 was 3.44 and the equity
multiplier in 2018 was 3.38. By rule of thumb, Petron Corporation was able to maintain its
equity multiplier close to 3.33. The company is able to manage its financials with the proper
level of risk. Moreover, it can be summed up that the Petron Corporations overall corporate
performance improved since 2014 since its return of equity increased from 0.03 to 0.7. Petron
Corporation’s sales significantly increased by 4,060 million pesos while its equity decreased
by 7,506 million pesos.
Additionally, comparing the abovementioned liquidity ratios to industry levels shows
that Petron Corporation is within the acceptable levels in the industry. The company’s asset
turnover ratio of 1.56 is quite above the industry level. However, its inventory turnover is
shows that it is below the industry level of 10.55 compared to 3.40. Although its overall
corporate performance improved and its financial strength and profitability is above the
industry level, Petron Corporation is return on equity of 0.09 is below industry level of 11.47,
according to Reuters (2018).