PETRONAS DAGANGAN Future-Proof
The COVID-19 pandemic is impacting economies, industries and society at large; compelling individuals and companies to rapidly change how they live and work. To remain competitive, we are working tirelessly to mitigate the impact of the pandemic by re-evaluating our approach to business and embracing forward-thinking to enhance the new workplace dynamic.
We are taking decisive action through progressive strategies, innovative solutions, sustainable practices and resource development. We believe these focused efforts will ensure business sustainability as we continue to pursue our growth agenda.
By pushing the boundaries of technology and innovation, we strive to create progressive solutions that add transformative, real-world value to our portfolio. Through digital initiatives and strategic collaborations, we want to be a part of our customers' lives in ways that matter. By focusing not only on present needs but anticipating future ones, we aim to make your everyday life simpler and better.
As Malaysia's leading retailer and marketer of downstream petroleum products, PDB continues to be more innovative, thinking differently and leading the way; to ultimately future-proof the organisation for what's next.
OUR REPORTING SUITE
The PDB Integrated Report is our primary report to stakeholders and it is aimed to provide balanced assestsment of the Group's ability to create sustainable value based on our short, medium and long-term strategy whilst supported by our 6 strong capitals.
Group annual financial statements (AFS) is a comprehensive report of the group's financial performance for the year.
ABOUT
THIS REPORT
Our Integrated Report is prepared to provide a comprehensive account of the Group's performance and how we seek to create value for our stakeholders. This year marks the 5th year of our integrated reporting journey with emphasis on driving greater disclosure quality, transparency and conciseness of the Report.
BY READING THIS REPORT:
• Investors will gain greater insight into our strategy, business model and how it creates value over time;
• Our customers will appreciate our world-class quality products and our emphasis on customer-centricity;
• Our dealers, contractors and business partners will recognise how we seek to foster win-win solutions with them;
• Our employees will see how we nurture a stimulating and rewarding work environment;
• Authorities are regulatory bodies who enforce policies and regulations, of which PDB will consistently strive to comply; and
• Communities will grow together with the Company by leveraging our education, community and environment programmes.
REPORTING SCOPE AND BOUNDARY
This Report covers the primary activities of PDB and provides material information relating to our financial and non-financial performances, covering the period from 1 January 2020 to 31 December 2020. This report is prepared in accordance with International Integrated Reporting Council, Audited Financial Statement ended 31 December 2020 and Sustainability Report.
Through this Report, we hope to give a comprehensive and holistic overview of the resources we use, challenges faced, actions taken and value we create for our stakeholders, and draw closer links between our risks and opportunities to give investors a clearer view on PDB's long-term prospects and growth potential.
REPORTING FRAMEWORK
In preparation of the report, linkage and connectivity have been added throughout the report for the purpose of integrating our narratives. We are guided by and make reference to the following statutory bodies:
• International Integrated Reporting Council (IIRC) Framework
• MMLR by Bursa Malaysia
• MCCG 2017 by Securities Commission Malaysia
• Corporate Governance Guide (3rd Edition) issued by Bursa Malaysia and Securities Commission Malaysia
•
•
MFRS IFRS
• Companies Act 2016
• MSWG's ASEAN Reporting Scorecard
Sustainability Report:
• Bursa Malaysia Sustainability Reporting Guide, 2nd Edition 2018, referencing the GRI Standards
• Incorporated the United Nations' Sustainable Development Goals (SDGs) in our approach to sustainability
ASSURANCE
NAVIGATION ICONS
Our financial statements are independently audited while the development of our non-financial reports are supported by our robust internal process and good governance practices.
Our Capitals
Financial
Human
Manufactured
Social and Relationship
MATERIAL MATTERS
Intellectual
Natural
This provides information that is material to PDB. We apply the principle of materiality in assessing what information should be included in . The information focuses on issues, opportunities and challenges that impact materially on PDB in ensuring a sustainable future while consistently delivering value and enriching lives of our stakeholders.
Our Strategic Priorities
Market Leadership
Great Place to Work
Safe, Reliable and Efficient
Digitally Enabled
FORWARD-LOOKING STATEMENTS
This contains certain forward-looking statements, typically with words such as 'aim', 'may', 'plan', 'will' and 'expected' or other similar expressions. These statements discuss future expectations concerning the dispositions of assets or financial conditions or provide other forward-looking information into 2021. These forward-looking statements are not guarantees or predictions of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and may cause actual results to differ materially from those expressed in the statements contained in this . Readers are cautioned not to put undue reliance on the forward-looking statements.
Our Stakeholders
Investors
Employees
Communities
Customers
Authorities/ Regulators
Rakan Niaga/ Dealers
Contractors/Suppliers/ Business Partners
Material Matters
Health, Safety and EnvironmentPerformance ManagementHuman CapitalSeamless and Frictionless Customer ExperienceSocial Capital
Conduct and Trust
The previous Annual and Integrated Reports are available on our corporate website atwww.mymesra.com.myand Bursa Malaysia's website
STATEMENT OF ACKNOWLEDGEMENT ON RELIABILITY AND COMPLETENESS OF PDB
PDB's Board of Directors acknowledges its responsibility in ensuring the integrity of this Integrated Report, which in the Board's opinion addresses all the issues that are material to the Group's ability to create value and fairly presents the integrated performance of PDB Group. This report has been prepared in accordance with the IIRC Framework.
This report was approved by the Board on 19 February 2021 and signed on behalf of the Board:
DATUK MD ARIF BIN MAHMOOD Chairman
AZRUL BIN OSMAN RANI
Managing Director/Chief Executive Officer
WHAT'S INSIDE
OVERVIEW OF PETRONAS DAGANGAN BERHAD
6-25
KEY MESSAGES
26-45
WHO WE ARE AND WHAT WE DO: OUR PROMISE | STATEMENT OF PURPOSE |
BRAND TAGLINE | PETRONAS CULTURAL BELIEFS | SHARED VALUES 6
WHAT WE OFFER: OUR CORE BUSINESS SEGMENTS | PRODUCTS & SERVICES 8 2020 HIGHLIGHTS
• AWARDS AND ACCOLADES 13
• BUSINESS HIGHLIGHTS 14
• FINANCIAL HIGHLIGHTS 15
• SUSTAINABILITY HIGHLIGHTS 15
GROUP CORPORATE STRUCTURE 16
WHERE WE OPERATE 18
OUR VALUE CHAIN 20
OUR STRATEGIC ALLIANCES 22
CORPORATE MILESTONES 24
CHAIRMAN'S STATEMENT 26
MD/CEO'S STATEMENT 32
CHIEF FINANCIAL OFFICER'S REVIEW 39
RESPONDING TO THE IMPACT OF COVID-19 44
VALUE CREATION AT PETRONAS DAGANGAN BERHAD
46-51
MANAGEMENT DISCUSSION AND ANALYSIS
52-111
This Integrated Report is available atwww.mymesra.com.my
OUR APPROACH TO VALUE CREATION 46
OUR VALUE CREATING MODEL 48
STAKEHOLDER ENGAGEMENT 50
STRATEGIC GROWTH
OPERATING ENVIRONMENT AND MARKET OUTLOOK 52
MATERIAL MATTERS 57
KEY RISKS AND MITIGATION 61
OUR STRATEGY 66
KEY PERFORMANCE INDICATORS 68
PERFORMANCE REVIEW Financial Performance
5-YEAR GROUP FINANCIAL HIGHLIGHTS 72
5-YEAR GROUP FINANCIAL SUMMARY 72
SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION 74
SEGMENTAL ANALYSIS 75
GROUP QUARTERLY FINANCIAL PERFORMANCE 76
KEY INTEREST BEARING ASSETS AND LIABILITIES 77
STATEMENT OF VALUE ADDED 78
DISTRIBUTION OF VALUE ADDED 79
FINANCIAL CALENDAR 80
INVESTOR RELATIONS 81
Business Review
OUR KEY OPERATIONS 86
RETAIL 89
COMMERCIAL 94
LPG 97
LUBRICANT 100
VENTURE BUILDER 104
DIGITALLY ENABLED 107
LEADERSHIP
112-127
GOVERNANCE
128-195
SUSTAINABILITY REPORT
196-247
FINANCIAL STATEMENTS
248-344
SHAREHOLDERS' INFORMATION
345-370
OUR BOARD AT A GLANCE 112
BOARD OF DIRECTORS' PROFILE 114
LEADERSHIP TEAM 120
LEADERSHIP TEAM'S PROFILE 122
ORGANISATION STRUCTURE 127
CHAIRMAN'S CORPORATE GOVERNANCE OVERVIEW 128
CORPORATE GOVERNANCE OVERVIEW STATEMENT 132
• OUR GOVERNANCE STRUCTURE
• HOW THE BOARD OPERATES
• NOMINATION AND REMUNERATION COMMITTEE REPORT 166
• BOARD AUDIT COMMITTEE REPORT 172
• BOARD RISK COMMITTEE REPORT 178
• RELATIONSHIP WITH SHAREHOLDERS 181
STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 182
• BUSINESS CONTINUITY
CORPORATE INTEGRITY AND ETHICS 194
DRIVING SUSTAINABILITY 196
ECONOMIC 200
ENVIRONMENT 206
SOCIAL 218
SUSTAINABILITY PERFORMANCE AT A GLANCE 247
APPROACHING THE FINANCIAL STATEMENTS 250 STATEMENT OF DIRECTORS' RESPONSIBILITY IN RELATION
TO THE FINANCIAL STATEMENTS 252
DIRECTORS' REPORT 253
STATEMENT BY DIRECTORS 258
STATUTORY DECLARATION 259
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 260 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME 261
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 262
CONSOLIDATED STATEMENT OF CASH FLOWS 264
STATEMENT OF FINANCIAL POSITION 266
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 267
STATEMENT OF CHANGES IN EQUITY 268
STATEMENT OF CASH FLOWS 269
NOTES TO THE FINANCIAL STATEMENTS 271
INDEPENDENT AUDITORS' REPORT 341
ANALYSIS OF SHAREHOLDINGS 345
• SHARE CAPITAL
• DISTRIBUTION OF SHAREHOLDINGS
• CLASSIFICATION OF SHAREHOLDERS
• LIST OF SUBSTANTIAL SHAREHOLDERS
• LIST OF DIRECTORS' SHAREHOLDINGS
• LIST OF LEADERSHIP TEAM'S SHAREHOLDINGS
• LIST OF 30 LARGEST SHAREHOLDERS
NET BOOK VALUE OF LAND AND BUILDINGS OF THE COMPANY 349
USAGE OF LAND 350
LIST OF TOP 10 LANDED PROPERTIES 351
CORPORATE INFORMATION 352
CORPORATE DIRECTORY 354
GRI CONTENT INDEX 355
GLOSSARY 358
NOTICE OF 39TH ANNUAL GENERAL MEETING 360
ADMINISTRATIVE GUIDE 366 PROXY FORM
OVERVIEW OF
PETRONAS DAGANGAN BERHAD
WHO WE ARE AND WHAT WE DO
PDB is committed to delivering innovative and differentiated offerings to fuel the nation's growth
OUR PROMISE
Making your everyday life simpler and better
Driven by our customer-centricity, digitalisation and agile ways of working with sustainability at the core, we strive to elevate the customer experience in the next normal, underpinned by our commitment to make their everyday lives simpler and better.
As we navigate the challenges of COVID-19 and fluctuating Brent price, our path forward remains clear - and that is to future-proof our business. To this end, we continue to leverage PETRONAS' extensive investments in R&D to deliver world-class downstream petroleum products and strengthen our market presence in these four core businesses:
• Retail
• Commercial
• LPG
• Lubricant
The scale of operations, facilities and manpower involved in the day-to-day logistics and distribution network of the Company necessitates a culture that prioritises Health, Safety and Environment.
Over the last 38 years, the hard work, determination and dedication of our passionate workforce has seen PDB grow from strength to strength.
Pushing the boundaries of technology and innovation is what we do. But why we do it, who it's for, matter just as much. We strive to be a part of our customers lives in ways that matter.
This requires evolving beyond traditional offerings and services.
By delivering on present needs and anticipating future ones, we continuously create progressive solutions that are relevant to our customers' changing needs.
This is our dream for a simpler, better and more meaningful tomorrow for all.
Brought to life with the power of progress.
PETRONAS
STATEMENT
BRAND
OF PURPOSE TAGLINE
CULTURAL BELIEFSSHARED VALUES
A progressive energy and solutions partner enriching lives for a sustainable futurePassionate about Progress
CUSTOMER FOCUSED I deliver solutions from the customer lens
INNOVATE NOW
I challenge norms and push boundaries
BE ENTERPRISING
I seek opportunities and make them happen
SPEAK UP
I express my views openly
COURAGE TO ACT
I take action to progress with pace
LOYALTY
Loyal to CorporationINTEGRITY Honest and UprightPROFESSIONALISM Strive for ExcellenceCOHESIVENESS United, Trust and Respect for Each Other
retail
Our Retail Business offers superior quality petroleum and non-fuel products and services through over 1,000 PETRONAS stations and over 800 Kedai Mesra respectively. With the introduction of Makan@Mesra, we aim to enhance customers' experience and expand our on-the-go food and beverages solutions with more quality offerings at affordable prices. This is complemented by Setel®, an innovative platform that provides every motorist a seamless experience for retail on-the-go. We also reward loyal customers through the PETRONAS Mesra Loyalty Programme, with offerings from more than 80 partners for instant redemption.
commercial
Our Commercial Business markets Diesel, Jet A-1, Fuel Oil, Bitumen, Gasoline, Kerosene, Petroleum Coke and Sulphur, among others, to various industries and market segments including agriculture, aviation, mining and quarrying, bunker, construction, manufacturing and services.
We also offer a suite of cleaner energy solutions through Liquefied Natural Gas bunkering solutions to meet marine customers' emerging needs, as well as Virtual Pipeline System to deliver LNG on road to off-grid customers in Peninsular Malaysia.
lpg
Our LPG Business is the market leader in Malaysia, offering LPG to the Household, Commercial and Industrial segments.
Being Malaysia's No. 1 Cooking Gas in the Household segment, we have further expanded the availability of LPG gas cylinders at selected PETRONAS stations nationwide.
For the Commercial and Industrial segments, we constantly strive to add value to our customers through our fully integrated LPG product offerings as well as providing technical solutions to support their business.
Our products are designed to meet safety standards and supplied through the nation's largest LPG supply and distribution network. This comprises of eight terminals and bottling facilities as well as more than 300 LPG Channel Members consisting of premier dealers, dealers and bulk dealers.
lubricant
Our Lubricant Business offers premium lubricant products based on Fluid Technology Solutions including Passenger Car Motor Oils, Commercial Vehicle Lubricants as well as Industrial and Marine Lubricants that cater for consumers and commercial customers, via three flagship brands, PETRONAS Syntium, PETRONAS Sprinta and PETRONAS Urania.
Beyond Malaysia, we also operate in Thailand through our subsidiary, PETRONAS International Marketing (Thailand) Co. Ltd.
WHAT WE OFFER
RETAIL
OFFERS FUEL AND NON-FUEL PRODUCTS AND SERVICES
at its network of >1,000 PETRONAS stations and 800 Kedai Mesra across the country
Fuel
Card Business
• PETRONAS Primax 97 with Pro-Race
• PETRONAS SmartPay
• PETRONAS Primax 95 with Pro-Drive
• Co-Branded Cards
• PETRONAS Dynamic Diesel (B10)
- CIMB and Maybank PETRONAS
• PETRONAS Dynamic Diesel (B20)
Credit Cards, CIMB PETRONAS
• PETRONAS Dynamic Diesel Euro 5 with Pro-Drive
Debit Card
• PETRONAS Gift Card
Non-Fuel
Loyalty Programme
• Kedai Mesra
• PETRONAS Mesra Loyalty Programme
• Quick Service Restaurants
• Food Solutions
• Banking Facilities
• Hypermarts
• Terminal Services
• Courier Services
• Car Wash
• White Label Products
• Co-Working Space
• Other Convenience Offerings
COMMERCIAL
WHAT WE OFFER
LPG
SELLS AND MARKETS LIQUEFIED PETROLEUM GAS
to household, commercial and industrial customers. We are the industry leader, holding the largest market share in Malaysia
LUBRICANT
PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN. BHD.
undertakes all sales and marketing functions of PETRONAS Lubricant products in Malaysia
Key Strategic Brands
• PETRONAS Syntium with °CoolTechTM
• PETRONAS Sprinta with UltraFlexTM
• PETRONAS Urania with ViscGuardTM
Passenger Car Motor Oils
• Fully Synthetic
• Semi Synthetic
• Mineral
• OEM Genuine Oil
Motorcycle Oils (4T, 2T and Scooter)
• Fully Synthetic
• Semi Synthetic
• OEM Genuine Oil
• Mineral
Commercial Vehicle Lubricants
• Heavy Duty Diesel Engine Oil
Automotive Functional Fluids and Oils
• Auto Transmission and Gear
• Greases
• Radiator Coolant
• Brake
Industrial and Marine Lubricants Fluids and Oils
• Hydraulic
• Compressor
• Turbine
• Agriculture
• Marine
• Metal Working
• Fishing Boat
• Industrial Gear
Other Services
• AutoExpert
• Technical Advisory
WHAT WE OFFER
VENTURE BUILDER
INVENT, INCUBATE AND SCALE DISRUPTIVE VENTURES
to diversify and grow new revenue streams
Setel®
An innovative platform that provides every motorist a seamless experience for retail on-the-go
ROVR
Malaysia's First Mobile Refuelling Partner
Gas Retailing and Transportation
LNG retailing as alternative clean fuel
PRYSM
Offering a range of motorsport and lifestyle products, available on PRYSM web and at selected
Kedai Mesra
AWARDS AND ACCOLADES
BRAND AND MARKETING
Association of Accredited Advertising Agents Malaysia
PUTRA BRAND AWARDS 2020
• Platinum Award for Automotive Fuel, Lubricants and Accessories
INNOVATION
Singapore Business Review
MALAYSIA TECHNOLOGY EXCELLENCE AWARDS
• Setel® - Technology Excellence Award (Digital Startup Category)
The BrandLaureate
THE BRANDLAUREATE E-BRANDING AWARDS 2020
• Setel® - Innovation (e-Payment App)
HSE
NCOSH
NATIONAL COUNCIL FOR OCCUPATION SAFETY AND HEALTH AWARD
• OSH Excellence Award (Transportation)
• OSH Excellence Award (Retail and Wholesale)
MSOSH
MALAYSIAN SOCIETY FOR OCCUPATIONAL SAFETY AND HEALTH AWARDS
• Gold Merit:
✓ Lumut Fuel Terminal
✓ Labuan Fuel Terminal
✓ Pasir Gudang Fuel and LPG Terminals
✓ Kertih Fuel and LPG Terminals
✓ Bintulu LPG Terminal
✓ Langkawi Fuel Terminal
✓ Prai Fuel and LPG Terminals
✓ Kota Kinabalu Aviation Fuel Terminals
• Gold Class 1:
✓ Kuantan Fuel Terminal
✓ Melaka Fuel and LPG Terminals
✓ Miri Fuel Terminal
✓ Kuching Aviation Fuel Terminal
✓ KL Aviation Fuel System Terminal
Malaysia Productivity Corporation
REGIONAL INNOVATION SHOWCASE TEAM EXCELLENCE (RTEX 2020)
• Gold Award
Hong Kong Wireless Technology Industry Association
ASIA SMART APP AWARDS
• Setel® - Certificate of Merit (Lifestyle, Social and Entertainment Category)
GOVERNANCE
Minority Shareholders Watch Group
MSWG-ASEAN CORPORATE GOVERNANCE AWARDS 2019
• 1st Place for Industry Excellence Award (Consumer Products and Services Category)
• 2nd Place for Excellence Award for Overall CG and Performance
• 3rd Place for Excellence Award for CG Disclosure
INVESTOR RELATIONS
MerComm, Inc.
ANNUAL REPORT COMPETITION (ARC) AWARDS INTERNATIONAL XXXIV
Retailer/Marketer of Downstream Petroleum Products Category
• Gold (Cover Photo Design)
• Gold (Traditional Annual Report)
• Bronze (Interior Design)
BUSINESS HIGHLIGHTS
RETAIL
Launched
PETRONAS PRIMAX 97 with Pro-Race
Operationalised
>10
New Stations
Introduced new
Kedai Mesra
concept
Preserved
Strategic Partnership
COMMERCIAL
Strengthened customer base and position as a
Reliable and Trusted Fuel Supplier
Secured
>200 New Contracts
Malaysia's
No.1
LPG
Cooking Gas
Expanded LPG@PS at
>100
PETRONAS stations
Fortified market leadershipEmbarked new sales channel through LPG@SundryShop
Top-Tier Premium
LUBRICANT
lubricant product
Secured New Customer
from key sector
Continued long-term Strategic
Partnership with Key Customers
FINANCIAL HIGHLIGHTS
SALES VOLUME 12,059.9 MILLION LITRES | PAT RM272.4 MILLION | DIVIDEND PER SHARE 38.0 SEN | MARKET CAPITALISATION RM21,259.9 MILLION |
SUSTAINABILITY HIGHLIGHTS
Economic
Environment
Social
ESTABLISHED PARTNERSHIPS with
>350
local SME food suppliers nationwide
Developed Entrepreneurship and Business Skills of Business PartnersCREATED BUSINESS opportunities for
536 sub-dealers nationwide
FRANCHISED the PETRONAS brand to
60 local automotive
SME workshops to drive customer footfall
PDB
1st LNG
Solution
Provider in Peninsular Malaysia, Providing Our Customers With Access To Cleaner Energy
Rooftop Solar
generated
197 MWh
Electricity Translated To Conservation
of 25,000 Mangrove Trees
54,603 litres
of Water Withdrawal From Harvested Rainwater - Equivalent To Water Used For 364 Commercial Vehicles Washed
ACHIEVED
ZERO
fatalities and LTI in 2020
RM1.5
million
Training InvestmentComplimentary Engine Oil Change for close to
400 medical frontliners
Ramadhan Community Service benefitted
>500 occupants
in 10 charity homes
GROUP CORPORATE STRUCTURE
Petroliam
Nasional Berhad63.94% (PETRONAS)
PETRONAS DAGANGAN BERHAD (PDB)
NETHERLANDS
Investment holding company
THAILAND
To market and distribute lubricants
MALAYSIA
To market and distribute lubricants
MALAYSIA
P S PIPELINE SENDIRIAN BERHAD
PDB: 50%
Shell Malaysia Trading Sdn. Bhd.: 50%
To maintain and operate the Multi-Product Pipeline and Klang Valley Distribution Terminal (MPP-KVDT) and the associated facilities for the transportation of petroleum products on behalf of the MPP-KVDT users
MALAYSIA
P S TERMINAL SENDIRIAN BERHAD
PDB: 50%
Shell Timur Sdn. Bhd.: 50%
To operate, manage and maintain the joint facilities - terminal, depot, warehouse etc. in Tawau and Bintulu on behalf of the owners, PDB and Shell Timur Sdn. Bhd.
Subsidiary
Joint VenturesAssociate
MALAYSIA
To provide technical consultancy services
MALAYSIA
KUALA LUMPUR AVIATION FUELLING SYSTEM SDN. BHD.
PDB: 65%
Malaysia Airports (Properties) Sdn. Bhd.: 20% Malaysia Airlines Berhad: 15%
SAUDI ARABIA
UNITED FUEL COMPANY LIMITED LIABILITY COMPANY
PAV: 40%
Asyad Holding Company for Commercial and Industrial Investment LLC: 33%
Tama International Investment LLC: 27%
To provide support, maintenance and operation services for airport facilities and gas fuel, storage equipment and fuel supply to aircrafts in the airports of the Kingdom of Saudi Arabia
MALAYSIA
IOT MANAGEMENT SDN. BHD.
PDB: 20%
Shell Timur Sdn. Bhd.: 10%
Senari Synergy Sdn. Bhd.: 70%
To operate and manage a petroleum storage terminal with facilities for receipt, storage and delivery of petroleum products at Senari, Kuching, Sarawak for the users, PDB and Shell Timur Sdn. Bhd.
MALAYSIA
TANJUNG MANIS OIL TERMINAL MANAGEMENT
SDN. BHD.
PDB: 20%
Shell Timur Sdn. Bhd.: 20%
Senari Synergy Sdn. Bhd.: 60%
To operate and manage a petroleum storage terminal with facilities for receipt, storage and delivery of petroleum products located at Bandar Baru Tanjung Manis, Mukah, Sarawak for the users, PDB and Shell Timur Sdn. Bhd.
To develop, operate, maintain and manage an aviation fuelling system at Kuala Lumpur International Airport and Kuala Lumpur International Airport 2, Sepang
MALAYSIA
To provide a seamless payment solution
WHERE WE OPERATE
FUEL TERMINALS:
1. ASB Labuan
2. PST Bintulu (JV)
3. KVDT Dengkil (JV)
4. Kertih
5. Kuantan
6. IOT Kuching (JV)
7. Labuan
8. Lumut
9. Melaka
10. Miri
11. Pasir Gudang
12. Prai
13. Pulau Langkawi
14. Sandakan
15. Sepangar Bay
16. CODT Tanjung Manis (JV)
17. PST Tawau (JV)
BUNKERING FACILITIES:
1. PST Bintulu (JV)
2. Kuantan
3. IOT Kuching (JV)
4. Labuan
5. Lumut
6. Pasir Gudang
7. Prai
8. Pulau Langkawi
9. Sandakan
10. Sepangar Bay
AVIATION TERMINALS:
1. Bayan Lepas
2. Bintulu
3. Kertih
4. KLIA
5. Kota Kinabalu
6. Kuala Terengganu
7. Kuching
8. Miri
9. Pulau Langkawi
10. Sandakan
11. Senai
12. Sibu
13. Subang
OUR VALUE CHAIN
OUR STRATEGIC ALLIANCES
CORPORATE MILESTONES
1980-1989
2000-2009
1981
• PDB operated its first PETRONAS service station at Taman Tun Dr. Ismail
1982
• Incorporated on 5 August as PETRONAS Dagangan Sdn. Bhd.
1985
• Introduced the first PETRONAS lubricant, PETRONAS LUBRAM, in the market
1987
• PETRONAS Dagangan Sdn. Bhd. launched its first unleaded fuel, PRIMAS
1990-1999
1993
• Converted to a public company on 21 August
1994
• Listed on the Kuala Lumpur Stock Exchange
• Launched PRIMAS PX2
1996
• Establishment of Kedai Mesra and new station image
2000
• Launched a new unleaded petrol, PETRONAS Primax
• Introduced PDB's websitewww.mesra.com.my to establish online presence
2001
• PDB offered Kad Mesra, Real Rewards Loyalty Programme to its customers
2002
• Official launch of Mesralink
2004
• Introduced PETRONAS Primax Baru
2006
• Launched a new fuel, PETRONAS Primax 3
2009
• Introduced PETRONAS Urania, PETRONAS Primax 95 and PETRONAS Dynamic Diesel
2010-2019
2010
• Introduced PETRONAS Primax 97
2011
• Launched PETRONAS Primax 95 Xtra
2012
• Launched the 1001st
PETRONAS station at Wangsa Maju
• Launched Gas PETRONAS Home Delivery
• Launched the first-of-its-kind twin stations namely, PETRONAS Station Solaris Serdang and PETRONAS Station Solaris Putra
• Regional expansion to the Philippines, Thailand and Vietnam
2013
• Launched the first fully branded automobile workshop, PETRONAS LubeXperts
• Rolled out PDB's Corporate Social Responsibility programme, 'Water For Life'
• Unveiled the improved PETRONAS SmartPay Chip Card
• Launched the first LPG Flexspeed facility in Melaka
2014
• Introduced PETRONAS Syntium 7000 Lubricant
• Launched PETRONAS Primax 95 with Advanced Energy Formula
• Appointed Lewis Hamilton, driver of the Mercedes-AMG PETRONAS Formula OneTM Team as the Technical Performance Consultant for PETRONAS Primax range of fuels and PETRONAS Syntium range of lubricants
2015
• Launched PETRONAS Syntium oCoolTechTM
• First to launch the new Euro 4M compliant PETRONAS Primax 97 with Advanced Energy Formula
• Launched the first-of-its-kind LPLFRD in Southeast Asia at LIMA '15
2016
• Relaunched PETRONAS Urania with ViscGuard™
• Launched PETRONAS Syntium SE, a high quality engine oil blended exclusively for PROTON
• PDB became the first non-Japanese lubricant company certified by HONDA as their supplier
• Launched the first Unmanned Terminal at Lumut, Prai, Melaka and Kertih Fuel Terminals
2017
• Introduced Breakfast Solutions, Mornings@Mesra
• Commenced selling products and merchandise through e-commerce platform
• Launched Gas2u, the first cooking gas ordering mobile application in Malaysia
• Launched the new PETRONAS Dynamic Diesel Euro 5 with Pro- Drive
• Introduced ChargEV facilities at selected PETRONAS stations
2018
• PETRONAS was named Brand of the Year by Putra Brand Awards
• Launched Setel®, an innovative mobile application that enhances customers' experience at PETRONAS stations
• PDB was awarded Company of the Year at the Edge Billion Ringgit Club and Corporate Awards
• Introduced PETRONAS' white label brand, Mesra Bites
2020
2019
• Launched the new PETRONAS Primax 95 with Pro-Drive
• Setel® fully operationalised in Klang Valley
• Introduced Redemption portal for easy and instant redemptionMesra
• Established PETRONAS AutoExpert service centre, offering high-quality car maintenance services
• Launched the latest PETRONAS flagship motorcycle engine oil, PETRONAS Sprinta with UltraFlexTM technologyrange of
• Introduced ROVR, the first mobile refuelling service in the country
JANUARY
Launched PRYSM, PETRONAS motorsport and lifestyle brand
Offering a range of motorsport and lifestyle products, available on PRYSM web and at selected Kedai Mesra.
Implemented B20 Biodiesel at PETRONAS stations
The implementation of B20 in phases is in support of the Ministry of Primary Industries' B20 programme for the transport sector.
FEBRUARY
Setel® expanded nationwide
PETRONAS customers can now experience Setel® - an innovative platform that provides every motorist a seamless experience for retail on-the-go.
SEPTEMBER
Launched Love Local campaign
The campaign aims to stimulate domestic consumption by empowering buyers to choose local brands, in the midst of the global pandemic. It is also in line with PDB's SME programme, established for over 25 years to support local entrepreneurs' business. To date, PDB has over 350 local vendors supplying to its Kedai Mesra nationwide.
Became Malaysia's first LNG solution provider using road trucks for off-grid customers in Peninsular Malaysia
Through the VPS solution, PDB now has the capability to deliver LNG using trucks fitted with cryogenic tanks, providing off-grid industries within Peninsular Malaysia access to cleaner energy.
OCTOBER
Introduced Makan@Mesra as an expansion of food and beverage solutions
PDB introduced Makan@Mesra, a new eatery corner within the newly designed Kedai Mesra that offers convenient yet fresh and well-balanced premium food at affordable prices. The new concept is part of PDB's continuous effort in growing its non- fuel business leveraging the increased demand for food-to-go solutions.
NOVEMBER
First in South East Asia to offer ship-to-ship transfer of LNG
The completion of its first LNG bunkering operation at Pasir Gudang, Johor marked the start of business for LBV. Through a collaboration with Titan LNG, a leading LNG bunkering solution provider operating in Europe, the operation involved a ship-to-ship LNG bunkering transfer from MV Avenir Advantage, PETRONAS' first LNG Bunkering Vessel to SIEM Aristotle.
DECEMBER
Launched the new PETRONAS Primax 97 with Pro-Race
Dubbed as its best fuel, the new fuel has been engineered for unbeatable performance delivering more power, responsiveness and efficiency, to meet motorists' driving needs. Utilising a formulation that is only unique to PETRONAS, the fuel has been proven to give more mileage, resulting in lower carbon emissions.
CHAIRMAN'S
STATEMENT
DATUK MD ARIF MAHMOOD
Chairman
DEAR SHAREHOLDERS,
The unprecedented COVID-19 pandemic combined with increased economic uncertainties and oil price volatility tested the resilience of governments and businesses alike, resulting in one of the toughest business environments that our company has ever faced. We also saw in 2020 the acceleration of energy transition commitments, innovation and collaboration, as governments and businesses adapted to the elevated societal expectations to address climate change impacts, depressed economic environment and new ways of working.
In PETRONAS Dagangan Berhad, our inherent resilience was tested. We managed to address these challenges proactively while ensuring undisrupted operations. Working closely with our suppliers, partners and customers, we ensured that the needs of our customers were met given our robust supply chains and reliable business operations. These efforts had enabled our company to remain profitable and continue delivering value for our shareholders.
I am, therefore, pleased to report that, despite the highly challenging business environment that we faced in 2020,
PDB delivered a dividend of 38.0 sen per share for the year.
I wish to reaffirm PDB's determination to continue building on our strengths and deliver on our purpose, "To be a progressive energy and solutions partner, enriching lives for a sustainable future"
CHAIRMAN'S STATEMENT
Moving forward, I wish to reaffirm PDB's determination to continue building on our strengths and deliver on our purpose, "To be a progressive energy and solutions partner, enriching lives for a sustainable future".
Rapid Implementation of Future-Proof Initiatives
The need to future-proof our business against the rapid changes affecting the energy industry has always been part of our strategy. The demand for cleaner forms of energy, increasing fuel-efficiency of vehicles and the rise of e-commerce have accelerated the need to build and scale new businesses to complement our fuels business. Our proactive response to these challenges has kept us ahead of the curve. This will be further elaborated in the MD/CEO's Statement and throughout this report.
Figures from the IMF show that the world economy shrank by 3.5% in 2020, despite the gradual rebound in the second half of the year. However, our robust strategy and ability to swiftly respond to the crisis, had allowed us to capitalise on the situation, especially when the market recovers.
The overall performance of our company in this difficult environment is a testament to the robustness of our risk management planning and the strength of the Leadership Team and businesses. As we push forward our next phase of our transformation journey, we shall amplify efforts on future-proofing the organisation by diversifying our revenue streams further. Our efforts in each of these areas are laid-out in detail in this report.
Leveraging on Our Strengths
PDB is confident in its ability to continue delivering value for our stakeholders. Central to this is our relentless commitment to our customers, complemented with strong brand recognition and superior products. We are also in an advantageous position where we are able to capitalise on the strengths of the PETRONAS Group as a whole.
Since its inception in 1974, PETRONAS now has a presence in more than 65 countries, establishing itself as one of the world's top oil and gas companies. PETRONAS retained its position as the most valuable ASEAN brand, as reported by Brand Finance Global 500. At the national level, PETRONAS' 11th consecutive win at the Putra Brand Awards is a testament that our automotive fuel and lubricants remain Malaysians' favourite.
Leveraging on PETRONAS' experience in developing the fluid technology that powered the Mercedes-AMG PETRONAS F1 team in winning its seventh consecutive FIA F1 World Constructors Championship in 2020, our technical and research team continue to develop superior fuels and lubricants. The strength of our reputation in both our commitment to customers' needs and superior products. Our continuous improvements, particularly in Primax fuels and Syntium lubricant, have earned us our customers' confidence and loyalty to our brand over the years. We will continue to push the boundaries to meet the high expectations of our customers and other stakeholders.
Strengthening Corporate Governance and Integrity Measures
PDB is committed to ensuring the highest standards of governance at all times. We place a priority on conducting our business with integrity, transparency and strong governance. It remains one of our greatest responsibilities, as a public-listed company, to continue instilling confidence and upholding the trust placed in us by our stakeholders.
In 2020, we continued to strengthen anti-corruption measures by undertaking and completing a corruption risk assessment to identify any gaps and take the necessary mitigation actions to reduce exposure to corruption risk. This year, we also implemented mandatory training for all directors, officers and employees of the Company, to create greater awareness about anti-corruption measures, as well as on the new national corporate liability provisions under Section 17A of the MACC Act 2009 which extended the liability to the Company for acts by individuals, commercial organisations and associated persons.
CHAIRMAN'S STATEMENT
The Board recognises that organisational integrity is vital to establishing a culture that supports our long-term success. The Board is, therefore, committed to ensure that Adequate Procedures in line with the Guidelines issued by the Prime Minister's Department pursuant to Section 17A of the Malaysian Anti-Corruption Commission Act 2009 are in place, as the Company's defence to Corporate Liability. The Board also notes that central to these new guidelines is the obligation that it imposed on the Board and the Leadership Team in ensuring compliance with anti-bribery laws. As a further commitment to integrity, the Leadership Team has also signed the Integrity Pledge. These measures all form part of our ongoing efforts to ensure adherence to the highest levels of corporate governance and transparency.
Our commitment to the highest levels of integrity is rooted in our corporate culture, which is derived from our Shared Values of Loyalty, Integrity, Professionalism and Cohesiveness. The Board continually seeks to ensure that these values are integrated and applied in our everyday working lives at all levels of our company.
Sustainability and Corporate Social Responsibility
Our Sustainability Agenda has now been fully integrated into the Board's mandate and form part of our discussion at the Board. Central to our approach to sustainability is a focus on seeking innovative solutions to reduce our carbon emissions, in support of the nation and our customers' efforts to transition towards a low-carbon future. Specific initiatives that we are undertaking in this area are detailed throughout this report.
Our success in delivering on these efforts are recognised and affirmed by our continued inclusion in the FTSE4Good Bursa Malaysia Index every year since 2015. The Index recognises companies that have made a genuine effort to embrace sustainable business practices.
Our company is highly conscious of its responsibilities as a corporate citizen. Against the challenging backdrop of 2020, we stepped-up our community engagement and social responsibility initiatives. At the national level, we made significant efforts to contribute to the wellbeing of frontliners and to the communities that we operate in. Our employees are at the heart of our business, and we supported them by enabling them to work from home where feasible and by maintaining strict SOPs to ensure the safety of those who continued to work on-site.
A commitment to Sustainability is integral to our business strategy and PDB will continue to balance the need for profitable growth, environmental protection and social responsibility as we move forward.
Awards and Accolades
The excellence that we have worked so hard to inculcate and embed in all areas of our operations continues to be acknowledged through numerous awards.
Our strong commitment to uphold high standards of corporate governance, accountability, transparency and a high level of disclosure of information to our stakeholders was proven when PDB was honoured with three top awards at the Minority Shareholders Watch Group ASEAN Corporate Governance Awards. PDB won awards in the following categories:
• Overall Corporate Governance and Performance
• Overall Corporate Governance Disclosure
• Industry Excellence Award (Consumer Products and Services)
Additionally, PDB was once again recognised for our high level of excellence in integrated corporate reporting this year. At the Annual Report Competition Awards International XXXIV, we won two Gold and one Bronze awards for the quality of our corporate reporting.
In 2020 we were also awarded a 4-star rating by FTSE4Good in the area of Environmental, Social and Governance, putting PDB among the TOP 25% of PLCs in the FBM EMAS by ESG Rating.
These accolades are a testament to the quality and commitment of our people.
Thriving in the Next Normal
PDB is well-positioned to continue thriving in what is increasingly being referred to as the next normal. While there are signs of recovery in 2021, the outlook for the year ahead remains volatile.
As PDB marks almost four decades in business, we truly appreciate the efforts that will be required to navigate the next normal and to ensure the long-term sustainability of the Company. The challenge is real, but we are confident that with the commitment of our staff and clear strategies, PDB will be able to continue delivering sustainable value for our shareholders. Accordingly, we look forward to continuing to work collaboratively with all our stakeholders as we endeavour to future-proof PDB.
Acknowledgements
At the end of what has been a very eventful year, I wish to thank my colleagues on the Board of Directors for their support. Also, my deepest gratitude to Dato' Sri Syed Zainal Abidin Syed Mohamed Tahir and Ms. Vimala V.R. Menon, who served the Board well before stepping down during the year. On behalf of the Board, I would like to wish them the best in their future undertakings. At the same time, I would like to welcome Ms. Tang Saw Hua and Encik Ahmad Adly Alias, who joined us in July and August, respectively.
PDB has an excellent Leadership Team that understands both the challenges and opportunities that our operating environment presents. I wish to thank them for their commitment and wish them further success in the year ahead.
Finally, I would like to express my profound gratitude to our shareholders for their continued support.
DATUK MD ARIF MAHMOOD
Chairman
MD/CEO'S
STATEMENT
Operating Environment
DEAR SHAREHOLDERS,
2020 was a pivotal year for PETRONAS Dagangan Bhd. In addition to facing the challenge of the COVID-19 pandemic, it also marked the conclusion of the three-year transformation journey that we began in 2018.
I am pleased to report that at the end of this period, our company has achieved the major goals that we set-out when we began this journey. We are now embarking on the next phase of our strategy, which is anchored on the goal of future-proofing our organisation, as we adapt to the new emerging economic and business landscape.
This has been an extraordinary year in terms of the challenges that PDB and the global economy have faced, as a result of the COVID-19 pandemic. 2020 began with forecasts of robust global and domestic economic growth and a strong outlook for the oil industry, with the benchmark Brent price reaching close to USD70.00 per barrel in the opening weeks of January. Likewise, on the domestic front, BNM projected that GDP would grow by 4.8% in 2020, a visibly stronger performance than the 4.3% growth recorded in 2019. This upbeat scenario was projected to support a favourable operating environment for Malaysian oil and gas companies.
The prospect of strong, synchronised, global growth and a supportive business environment, however, was overturned by the rapid spread of the COVID-19 pandemic in the first quarter of the year. The resulting international travel restrictions and the lockdowns imposed by governments in many countries caused a massive drop in petroleum demand, particularly in the retail and aviation sectors, as both road and air travel were severely limited.
The impact of these restrictions led to a global decline in consumer spending and sentiment.
The result of this contraction in economic activity on the global oil and gas industry was acute, with the plunge in demand resulting in massive oil price declines. The downwards pressure on prices was further intensified by the price war between leading oil exporters that began in March. Consequently, the benchmark Brent oil price which had reached a high for the year of USD69.97 per barrel in the first week of January plunged to a low of USD13.24 per barrel by 21 April 2020. The gradual recovery in demand for oil over the course of the second half of the year as governments began to ease lockdowns and travel restrictions sustained a rise in the price of oil, resulting in an average price for the year of USD41.68 per barrel of Brent. By contrast, the price of Brent averaged USD64.00 per barrel in 2019.
PDB also faced a highly challenging domestic business environment, with the Malaysian government implementing a MCO in March, which brought business activity in many sectors to a near halt. In response to these measures, BNM initially revised its 2020 GDP growth projection downwards to between -2% and 0.5%, before revising it down even further in the second half of the year to between -3.5% and -5.5%. These successive downward revisions in growth estimates reflected the depressed economic activity and business sentiment during the pandemic period, where PDB recorded its first quarterly loss since Quarter 1, 2005.
The second half of the year saw a much stronger business and economic environment as governments across the world began easing lockdowns and travel restrictions and introduced large-scale stimulus packages. In Malaysia, these took the form of the government's PRIHATIN and PENJANA packages. These policy measures supported a gradual rebound in the oil and gas industry in the second half of 2020 and have led to renewed optimism about the outlook for 2021.
MD/CEO'S STATEMENT
Against the challenging backdrop of 2020, we have also continued to see the acceleration of key trends that PDB has long anticipated and sought to capitalise on. Rapid digitalisation of the economy has been one of the most obvious outcomes of the pandemic. The lockdowns and MCOs in Malaysia have led to massive growth in the digital and low-touch economy, spurring the e-commerce and logistic industry. Alongside this, we have also continued to see a push by governments and consumers to diversify away from traditional fossil fuels and towards cleaner forms of energy as the issue of sustainability continues to move to the foreground. This global energy transition is the single largest macro-trend impacting the operating environment for the oil and gas industry.
In response to these trends and to the changed environment that we envision, PDB has embarked on a strategy to future-proof our organisation. This entails building greater flexibility into how we operate by embedding digitalisation more deeply into all areas of our business, and by diversifying our revenue base through offering clients cleaner energy solutions, such as LNG and B20 Biodiesel, as well as actively working to grow the non-fuel areas of our business. Our specific initiatives in this direction are laid-out in this Report.
Effective execution of these goals is crucial to our ability to continue thriving in the rapidly-evolving global economic milieu and forms a key part of our strategy going forward.
Accelerating Our Transformation
Our resilient performance in the face of the challenges posed by COVID-19 and the MCO is a testament to the effectiveness of the strategy and processes that we have adopted as part of our transformation journey since 2018, which was summarised by the tagline Move Like Never Before. A key element of this transformation has been to shift our company away from an over-reliance on revenue from fuel.
Our growth strategy in the three-year period 2018 to 2020 has been anchored on the four key areas of achieving Market Leadership in all our business segments; being Safe, Reliable and Efficient in operations; providing a Great Place to Work for our employees; and being Digitally Enabled to leverage the power of technology in accelerating growth. Our success in implementing these strategies has had a visibly positive impact on our business during this period and we aim to accelerate the pace of transformation going forward.
Building on these strong foundations, and in alignment with PETRONAS Group's overall strategy, the next phase of our journey will focus on 3 main pillars - Value, which means sustaining the strength of our current businesses; Growth, which will be achieved by continuing to diversify our business in the non-fuel sector and capitalising on the energy transition; and Sustainability, which entails striking a balance on our triple bottom line of people, profit and planet. Together, these three pillars anchor our strategy to future-proof our organisation in an increasingly challenging business landscape.
To achieve this aim, we will continue to focus on delivering breakthrough products, accelerating our digital initiatives and strengthening our strategic collaborations. While the growth strategy has now entered a new phase, the intention remains the same - creating sustainable value for our shareholders and to deliver on our vision of simplifying and improving our customers' lives.
Our Performance
I am pleased to share with you that despite the extraordinary challenges that we faced in 2020, PDB has achieved a commendable set of operational and financial results. Our company's performance is a testament to the extraordinary dedication of our people who, across the board, rallied and came together to deliver for our company and our stakeholders during the toughest business environment that we have ever faced. I am proud to have served alongside them.
The COVID-19 pandemic had a negative impact on both our top and bottom line performance in the year under review.
Lower demand for oil and gas as a result of the lockdowns and travel restrictions, coupled with a lower average Brent price for the year led to a decline in sales volume and reduced financial margins as a result of our lower average selling price.
For the financial year ending 31 December 2020, PDB registered a sales volume of 12,059.9 million litres and a total revenue of RM18,710.9 million. PDB observed a reduction in revenue of 38.2% this year, due to a drop of 22.9% in sales volume, which was compounded by the 20.1% lower average selling price achieved. In line with trends across the industry, these numbers are markedly lower than in 2019. For 2020, we recorded a Profit After Tax of RM272.4 million.
RM Million
18,710.9
2020
30,293.6
2019 2018
30,068.8
In view of these results, the Board is pleased to announce that the Company has declared a total dividend for the year of 38.0 sen per ordinary share.
Sustaining Market Leadership
The impact of COVID-19 was visible across all segments of our business in 2020. In particular, it emphasised our continued over-reliance on revenue from mobility. Going forward, PDB will continue to work on future-proofing our company by refining and accelerating plans to expand and diversify our non-fuel revenue.
Our Retail Business was strongly affected by demand disruption for fuel in 2020, amidst the lockdown in the first half of the year and the resulting dampened economic activity. Nonetheless, PDB continued to build on the strength of previous years, with the launch of more than 10 new stations and the roll-out of several new products and initiatives, despite the particular challenges of the year.
In December 2020, we launched the new PETRONAS Primax 97 with Pro-Race, the world's first dual friction modifier, which is 25.0% more efficient in friction reduction than the previous version. It also delivers significantly higher engine power and fuel efficiency, resulting in reduced carbon emissions, with two-thirds of drivers experiencing more power, responsiveness and efficiency. The launch has resulted in a 10.0% increase in sales over the corresponding period. In the non-fuel area, we have continued to strengthen the offerings in our Kedai Mesra, with the expansion of our own-brand Mesra Bites range. Additionally we now have more than 100 Tealive X PETRONAS kiosks operating across the country in 2020 and introduced a menu that is exclusive to our outlets, strengthening our collaboration with the popular Tealive brand.
We have also begun adapting and remodelling the Kedai Mesra at our PETRONAS stations to give them a warmer, more customer-friendly ambience. The new Kedai Mesra concept was piloted in strategic locations within the Klang Valley in 2020 and will continue to be expanded in the year ahead. As part of that transformation, we launched the new concept Makan@Mesra in October, which offers in-store ready-to-eat and ready-to-drink products, and will be expanded significantly over the coming year. These initiatives form part of a concerted strategy to attract additional traffic to our stations and diversify our Retail Business away from over-reliance on revenue from fuel and mobility.
Our Commercial Business was adversely impacted by the unprecedented lower demand for petroleum products and the steep drop in oil prices as a result of COVID-19 and the MCO in the first half of the year. Total volume for the year declined by 32.6%. However, we were able to mitigate the severity of the impact from the downturn through the implementation of effective recovery and rebound strategies to capitalise on post- MCO recovery by focusing on maximising sales to high-margin sectors whilst growing our share of wallet from common customers.
MD/CEO'S STATEMENT
Commercial Business had always thrived in providing unrivalled level of service and solutions which had enabled us to continue securing new customer in 2020 despite the tough economic and business environment.
Our LPG Business retained its position as the industry leader in 2020. We remain Malaysia's No.1 retailer and marketer of liquefied petroleum gas, utilising our extensive network of LPG channel members, which consists of premier dealers, dealers and bulk dealers. This year, we launched a new sales channel through our LPG@Sundry Shop initiative and secured more than 40 new commercial customers. Additionally, we continued to leverage on our network of stations with LPG@PS, which is now Future-Proofing PDB available at over 100 stations nationwide. Notwithstanding these
initiatives, overall volume declined by 12.8% due to lower demand resulting from the implementation of various stages of MCOs. We are confident, however, that these initiatives lay the basis for our further growth as we go forward.
Our Lubricant Business remains an area with major growth potential and we maintain a clear focus on achieving market leadership in both the B2B and B2C segments. Critical to this is building strong brand awareness of our key products, PETRONAS Syntium, PETRONAS Sprinta and PETRONAS Urania through a sustained and integrated communications strategy.
The integrated marketing campaigns that we undertook in 2020 have had a tangible effect, with brand awareness for our key products rising from 10.0% in 2019 to 57.0% in 2020 amongst retail consumers.
On the B2B front, our lubricants business made further inroads into key target sectors and we continued to win new anchor customers in 2020.
Against the challenging backdrop of 2020, we continued to expand our market reach by capitalising on cross-selling opportunities through PDB's other business segments. Additionally, by entering into e-commerce, we have expanded our ability to reach consumers beyond the existing geographic boundaries. We have also continued to build long-term partnerships with strategic stakeholders in a business model that emphasises sustainable margins for all business partners along our value chain. We are confident that these measures strengthen the foundations for future growth.
While we are optimistic about the strong growth prospects for our lubricants business going forward, the challenging environment in 2020 saw overall sales volume decline by 14.1% from 2019.
In a year where traditional business models were under pressure everywhere, PDB continued to innovate with the launch and scaling-up of ventures that form part of our future-proofing strategy.
Among the key initiatives that we implemented this year was the nationwide roll-out of Setel®, an innovative platform that provides every motorist with a seamless experience for retail on-the-go. The platform delivered on its promise to disrupt retail on-the-go through the Deliver2Me feature and in-store cashless payment with the Setel® wallet. Deliver2Me allows customers to purchase selected items from participating Kedai Mesra and have them promptly delivered directly to their vehicles while refuelling. These new, innovative features offer greater convenience and maximise safety for our customers.
The Mesra Rewards redemption platform is also now on Setel® and customers can seamlessly redeem their Mesra points for attractive rewards right from the app or through the web at app.setel.my.
Customers also requested for more payment options and we met this need by increasing the modes of payment available through Setel® throughout 2020. Setel® facilitated cash top-ups and introduced CardTerus that enables customers to make direct credit card payments to enjoy fuel cashback benefits. The platform experienced rapid growth in 2020, with a total customer base of more than 2 million motorists, quadrupling its 2019 record, as demand for low-touch services accelerated.
Recognising the impact of the global transition towards cleaner energy, PDB is working closely with our customers to encourage them to adopt cleaner fuels, as well as expanding our distribution capacity to serve previously difficult-to-reach customers. As part of this effort, we have launched our new Gas Retailing and Transportation business, which promotes LNG as an alternative
clean fuel. With the launch of this new venture, PDB becomes the first LNG solutions provider using road trucks for off-grid customers in Peninsular Malaysia. Our distribution system utilises a Virtual Pipeline Solution of trucks fitted with cryogenic tanks, giving us the capability to deliver LNG to industries within Peninsular Malaysia that are not connected to the natural gas infrastructure, providing them with access to cleaner energy. As an essential part of our growing LNG distribution infrastructure, we have also established our first LNG bunkering operation at the port of Pasir Gudang.
In addition, we further grew ROVR's customer base, validating demand for mobile refuelling service. ROVR, which now operates 14 trucks, continues to give back to communities by deploying its truck to targeted enhanced MCO areas. We have also continued to launch new ventures on the retail front in order to keep growing our non-fuel revenue. In 2020 we launched PRYSM, PETRONAS' authorised merchandiser, offering a range of motorsport and lifestyle brands, sold online and at selected Kedai Mesra.
Together, these ventures form a key thrust by PDB to continue diversifying our growth drivers as we go forward.
Sustainability: A Commitment to Our Triple Bottom line
PDB remains highly committed to the goal of sustainability,In 2020, we also doubled down on efforts to promote entrepreneurship and boost local businesses hit by COVID-19.
Our Love Local Campaign drew more than 80 local brands and ignited pride amongst Malaysians to support local talents and local products. Our SME programme remains vibrant 25 years on, and has over 350 vendors supplying to Kedai Mesra across the nation.
In a year when so many across our nation were badly affected by the COVID-19 pandemic, PDB actively contributed to the national relief effort and supported our frontliners, in particular, through various programmes.
Our fundamental commitment to sustainable growth and business practices is made clear by our decision to make Sustainability the third leg in our three-pronged transformation plan as we work to future-proof our organisation.
Ensuring Safe, Reliable and Efficient Operations
PDB recognises our obligation to ensure the safety of our employees, customers, Rakan Niaga, business partners and contractors as our highest priority. This has never been more critical or more challenging than under the circumstances created by COVID-19. Accordingly, at the beginning of the COVID-19 crisis, we made swift and decisive decisions to strengthen health and safety SOPs across our business. We also enabled a high degree of working from home through improved technology in order to minimise infection risks.
Recognising that our people are our greatest asset, we also continued to invest in training and health and safety throughout the year. Our commitment and effectiveness in ensuring the health and safety of our people has been recognised by the award of 8 Gold Merit and 5 Gold awards by the Malaysian Society for Occupational Safety and Health.
which we have worked to embed into all aspects of our business Digitally Enabled
and operations. Not only do we believe that this is the right thing to do, but we believe that it is sound business practice. In the context of our business model, Sustainability entails striking a balance on our triple bottom line: people, profit and planet.
We acknowledge the role that we play in addressing environmental protection and climate change. In line with PETRONAS' Net-Zero Carbon Emissions aspiration by 2050, PDB is advancing the transition to offer cleaner fuel options to its customers. PDB became Malaysia's first LNG solution provider through a virtual pipeline system in Peninsular Malaysia. We will also continue to install renewable energy options at our stations, wherever feasible.
Digitalisation is a crucial driver of our growth strategy and its importance has been enhanced by the rapid shift to online commerce during the course of the COVID-19 pandemic. This has been an important year for the implementation of the Digitally Enabled leg of our transformation and growth strategy as we rolled-out major initiatives that began in 2019 under our Digital Blueprint. At the heart of our digital strategy is the effective leveraging and optimising of the vast amounts of data that we generate, in order to deliver a seamless and frictionless customer experience. This is enabled through PDB's establishment of one of the largest Data Lakes in PETRONAS and a new Customer Relationship Management platform in 2020.
MD/CEO'S STATEMENT
As we continue to leverage the power of technology, we have increasingly embedded digitalisation, anchored on our Cloud First and Mobile First strategies, in all aspects of our business and it serves as the key driver behind some of our new ventures. Technological innovation across our company accelerated in 2020 with the introduction of our new next generation cloud-based Point-of-Sales system; and installing our new Outdoor Payment Terminal with enhanced digital and secured touchpoints at selected stations nationwide. The impact and implication of these individual technologies are dealt with in the Digitally Enabled section of this report. Collectively, they form a major push by PDB into an increasingly digitally-driven and touchless business model.
Outlook
The global roll-out of vaccines for COVID-19 across 2021 offers the prospect of a strong rebound in economic activity this year. The IMF, which estimates that global GDP contracted by 3.5% in 2020, forecasts a rebound to growth of 5.5% for 2021. Likewise, on a national level, BNM projects that Malaysia's economy will grow by between 6.5% and 7.5% in 2021. This rebound, however, will not result in a return to the status-quo. It is increasingly clear that many of the trends that accelerated under the COVID-19 pandemic are now embedded in the new normal and that companies will have to adapt their strategies accordingly. Among the key changes that will impact our industry is the rapidly accelerating pace of digital adoption that has resulted from consumers being forced to become familiar with online transactions during the lockdowns. The resulting increase in demand for e-commerce, digital entertainment, and remote working arrangements will be key features of the new post-COVID-19 business landscape.
Adapting to this emerging landscape will require us to move from a product-centric approach to one of creating digital solutions around our customers at every step of their purchase experience. In short, as we go forward, we aim to become a solutions partner to our customers by simplifying and improving their everyday experiences.
Alongside the changes caused by the COVID-19 pandemic, the long-term trends towards tighter environmental regulations and the continued growth in the number of energy efficient vehicles will also impact our business and we will continue to adapt to these anticipated changes by growing our clean fuels and non-fuels businesses.
With the prospect of a stronger economic performance in 2021, we believe that our strategy of continued focus on customer-centricity, diversifying our offerings, greater cross- selling of our products and services, accelerating digitalisation, strengthening sustainability practices and maintaining a strong focus on growing our non-fuel revenue leave us well-positioned to capitalise on the key growth trends in the post-COVID-19 economy.
To deliver on this vision, we will continue to push the boundaries of technology and innovation and to move beyond the traditional offerings and services. Our focus must be not only on the present needs of our customers but anticipate future ones. That is how we will continue to build sustainable value and deliver on our promise of making our customers' lives simpler and better.
Acknowledgements
I wish to begin by thanking our customers for their continued support during the year, as we all played our part in tackling the challenges brought-on by COVID-19. I would also like to express my gratitude to all our shareholders for your continued confidence in us in 2020 despite the extended market volatility.
PDB will continue to work to deserve your trust in the year ahead.
I wish to thank the Chairman of the Board, fellow Board of Directors and my colleagues on the Leadership Team for the extraordinary dedication that they have continued to show. Working together with you, I look forward to continuing to focus on the opportunities ahead for our company.
I would like to acknowledge Cik Norliwati Abdul Wahab, En Aadrin Azly, En Mohd Shobri A. Bakar and Pn Nur Nadia Mohd Nordin for their contributions during their tenures on PDB's Leadership Team. As they depart, I would like to welcome Pn Farzlina Ahmad Murad, Pn Mazlin Erawati Ab Manan, Pn Normah Basri and Pn Suria Kamarul Baharin who have recently joined our Leadership Team.
Finally, I wish to thank our Rakan Niaga, Dealers, Business Partners and Contractors whose support has been essential to enabling our success on our transformation journey.
CHIEF FINANCIAL OFFICER'S
REVIEW
PDB Group saw a softer performance in the year under review, reflecting the weaker economic environment.
With a firm balance sheet and cash position, the Group will continue pursuing our agenda of future-proofing our business.
CHIEF FINANCIAL OFFICER'S REVIEW
Overall Financial Performance
For the financial year ended 31 December 2020, PDB recorded revenue of RM18,710.9 million, a decrease of 38.2% from the
Retail Segment
Revenue
RM Million
year before. This was attributable to a 22.9% decline in total11,178.3
sales volume, as well as a 20.1% decrease in average selling
2020
price.15,369.8
Group PBT for the year stood at RM386.4 million, a decrease of 65.8% from the previous year. This was primarily due to lower demand during various stages of MCO. The impact of these declines was offset by a reduction of RM279.5 million in OPEX.
OPEX for the Group reduced by 11.1% to RM2,249.0 million mainly due to lower expenditure on advertising and promotions, as well as lower redemption of Mesra points, reflecting both the challenging operating environment in 2020, and the continued stringent management of expenditure across the Group.
Segmental Performance Review
The Group's reportable segments comprise Retail, Commercial and Others. The Retail Segment consists of sales and purchases of fuel, LPG and lubricant to the retail sectors. Our Commercial
2019
PBT
RM Million
2020
2019
Revenue
RM Million
2020
2019
PBT
RM Million
Segment consists of sales and purchases to the commercial 2020 sectors. The combined Retail and Commercial Segments
represent 99.9% of the Group's revenue and PBT. The Others 2019 Segment consists of aviation fuelling and technical services, as well as all business activities other than those in the Retail andCommercial Segments.
Retail Segment
The Retail Segment saw a decrease in revenue of 27.3% in 2020.
This was driven by a 16.2% decrease in average selling price, as well as a 13.3% decrease in sales volume, in tandem with overall lower demand.
PBT for the year decreased by 61.2%, mainly due to lower gross profit from Mogas and Diesel, following a sharp decline in MOPS prices at the beginning of the year, as well as lower sales volume.
The impact of this decline was offset by lower operating expenditure incurred during the year.
The performance of the Retail Segment was heavily impacted during the first half of the year, due to the full lockdown imposed by the Government from March until May. A gradual recovery in monthly sales volume was observed during the second half of the year, but this was slightly impacted by the reintroduction of the MCO following an increase in COVID-19 cases in Quarter 4, 2020.
During the year, the Retail Segment pro-actively focused on accelerating key marketing programmes and capturing market demand with the introduction of a new premium fuel, PETRONAS Primax 97 with Pro-Race, in December 2020.
222.6
572.5
Commercial Segment
7,521.1
14,897.1
222.9
551.9
Our strategy of growing non-fuel income continues to deliver results. Mesra income grew by a commendable 3.6% against 2019. This rise in income was driven, primarily, by the various enhanced offerings at our Kedai Mesra and collaboration with new and existing partners. Retail delivered this higher income in spite of the MCO, which resulted in shorter operational hours for our Kedai Mesra, as well as restrictions on the number of customers in the stores, in adherence to strict government-mandated SOPs.
Our relationships with our customers and dealers are at the very heart of our business and value-creation strategy. Accordingly, against the challenging backdrop of 2020, we worked closely with our dealer network to continue building their capacity and to ensure the continued reach of our distribution network.
Commercial Segment
Our Commercial Segment recorded a decrease in revenue of 49.5%, due to a 33.1% decline in sales volume and a 24.4% decrease in average selling price. PBT for the segment decreased by 59.6%, in line with lower gross profit from Jet A-1 and Diesel due to lower MOPS prices and the decreases in sales volume in the first half of the year.
The decrease in the sales volume for Jet A-1 was, predominantly, due to local and international travel restrictions. The decline in sales volume for Diesel was a result of lower demand from the manufacturing, construction and upstream sectors due to the prolonged MCO. As part of its rebound and recovery efforts, the Commercial Segment is focused on leveraging on the post-MCO recovery by maximising sales to high-margin sectors and pursuing a higher share of wallet from common customers. Additionally, we will continue to provide comprehensive offerings to improve our customer value proposition.
Other Income
Other income declined by 17.2% due to lower interest income, reflecting our lower average cash balances and lower average interest rates during the year. The decrease was, however, offsetted by higher Kedai Mesra income and higher sales from PRYSM, an official PETRONAS merchandise platform as part of our continuous efforts to grow the non-fuel segment.
Group Financial Position
PDB maintained the strength of its balance sheet and overall financial position in 2020. This ensured the availability of funds to support our business plans and maximise shareholder value. Effective financial management ensured that the Group continued to meet all of its financial obligations in the year under review while reducing leverage.
Total Assets
The Group's total assets decreased by 16.4% from the previous year. The decrease was due to lower cash and cash equivalents, as well as lower trade and other receivables, in line with the lower overall sales recorded by the Group and the special dividend payment in Quarter 1, 2020.
Total Liabilities
Total liabilities decreased by 32.6% in 2020, as compared to 2019. The decrease in total liabilities was mainly due to lower trade and other payables as a result of the decrease in purchased volume, as well as lower purchase prices, stemming from lower overall demand.
Total borrowings for the year declined by 46.7% from 2019, mainly due to the repayment of lease liabilities and Islamic financing facilities.
Total Assets
Total Liabilities
RM Million
RM Million
4,067.0
1,169.4
2,691.8
410.2 21.2
2,342.1
133.4 208.5
8,359.6
2,684.0
2020 2020
9,996.3
3,984.9
2019 2019
4,134.9
1,565.0
3,425.5
796.8 74.1
3,440.2
182.0 362.7
PPETrade & Other ReceivablesCashInventoriesOthers
Trade & Other PayablesTaxationBorrowings & Others
Cash Flows
In anticipation of reduced cash inflow under the current operating environment, the Group implemented stringent cash flows monitoring to ensure that we maintained adequate cash balances and an optimal working capital position.
The Group's cash and cash equivalents stood at RM2,691.8 million as at 31 December 2020. This represents a decrease of 21.4%, from the RM3,425.5 million recorded as at 31 December 2019.
CHIEF FINANCIAL OFFICER'S REVIEW
Net cash generated from operating activities was lower in 2020. Strong Cost Discipline and Stringent Spending
This was mainly due to a reduction of RM9,385.6 million in sales
as a result of lower sales volume, as demand was impacted by the MCO. The biggest reductions in demand were for our Mogas, Diesel and Jet A-1. The impact of this decrease was offsetted by lower purchases of RM9,377.3 million.
Cash used for investing activities was, substantially, comparable against last year. Cash outflow from financing activities was RM86.8 million lower due to lower dividends paid, in line with our lower profit after taxation during the year.
Returns to Shareholders
Despite the unprecedented circumstances that we faced in 2020, PDB has continued to demonstrate its appreciation to our shareholders by paying a dividend of 38.0 sen per share for the year under review.
PDB has a dividend policy of paying-out 50.0% of the Company's PAT to our shareholders. However, we have consistently exceeded this. The Group maintained this policy in 2020, continuing to provide our shareholders with a high-quality income stream, despite the challenging business landscape.
The determination of our total dividend for the year remains
PDB maintained strong cost discipline across 2020, as we worked to ensure the right balance between our capital and operational expenditure.
Our OPEX is subject to extensive monitoring across the organisation and we continue to focus on cost optimisation and the reprioritisation of initiatives such as advertising and promotions spending to capitalise on the evolving business environment.
In the area of CAPEX, PDB has enhanced our investment framework by creating a special committee, known as the Investment Review Committee, to oversee overall capital spending. The enhanced framework ensures that any capital expenditure is prioritised based on its financial returns and criticality to our HSE needs, meeting our regulatory obligations and to our growth strategy before the spending is authorised. Accordingly, in 2020 we continued our asset-refresh programmes at our stations, as part of our HSE compliance.
During the year, we also continued to invest in the new ventures that are emerging as our growth-drivers and in the key digital initiatives that differentiate us and will help future-proof our business.
consistent with our policy of maintaining sufficient cash balances Robust Management of Working Capital and
to fund the Company's investment and growth requirements.
Dividend Payout to Shareholders
38.0
96.0%
70.0
86.0%
97.0*
78.0%*
70.0
81.0%
Dividend Payout (sen)Dividend Payout Ratio
* Includes special dividend of 22 sen per ordinary share ** Includes special dividend of 15 sen per ordinary share
Liquidity
The Group's operations and performance are strongly influenced by movements in petroleum product prices. Against the volatile backdrop of the year under review, PDB took rigorous action to ensure that we maintained sufficient working capital by focusing on optimum inventory and liquidity management.
In order to minimise the risk of financial exposure to the Group from movements in the oil price, we have continued to maintain inventory at a commendable level of 11.76 days, despite the severely challenging environment due to COVID-19. Insight into inventory optimisation is achieved through our integrated inventory management committee meetings.
Liquidity risk is managed by ensuring that we maintain a sufficient cash balance through comprehensive monitoring and forecasting of cash inflows and outflows.
PDB ensures effective credit risk and trade receivables management through the stringent assessment of credit terms and credit limits of both new and existing customers, based on the PETRONAS' Credit Risk Framework and Guidelines. We also continue to monitor trade receivables closely to ensure timely collection and to reduce risk from overdue payments.
For more information on how we manage credit risk, please refer to Key Risks and Mitigation on pages 61 to 65 of this
Effective Risk Management
In a highly challenging year, PDB was not spared from the negative impact of the COVID-19 pandemic which exposed us to unfamiliar and complex risks. In response, we strengthened our risk
In addition, BNM has granted an e-money license for Setel®, an innovative platform that provides every motorist a seamless experience for retail on-the-go.
management practices by implementing a robust and Engagement with the Investment comprehensive framework to manage the Group's risks within our Community acceptable risk appetite.
During the year, PDB has prioritised our focus on effective risk management through identification, assessment and management
of the risks faced by our business. We performed a robust review
of our corporate risk profile, which includes periodic assessments
of the risks we believe could threaten the Group's business operations, performance and profitability. As the COVID-19 outbreak quickly developed into a pandemic, we took steps to move the pandemic risk from an emerging risk to a critical risk in our corporate risk profile.
Another important area of focus during the year was to ensure our preparedness in meeting the requirements of the newly introduced Corporate Liability Provisions under Section 17A of the Malaysia Anti-Corruption Commission Act 2009. We have taken the necessary steps to identify and assess various corruption risks across our business operations, in order to identify as well as implement adequate mitigation measures.
As the Group continues to uphold a pervasive risk management culture, we mandated that all our decision papers include rigorous risk assessments for management and the Board's deliberation. The Group also strives to inculcate a strong risk culture and ownership by engaging our employees through a risk management communications programme.
For more information on how we manage risks, please refer to Key Risks and Mitigation on pages 61 to 65 of this
Heightened Governance and Compliance
Over the years, the Group has built a strong governance structure, supported by approved policies, framework and processes.
During the year, PDB continued to promote a stronger governance and compliance culture focusing on the implementation of Adequate Procedures as a defence against corporate liability charges under the new Section 17A of MACC Act which became effective on 1 June 2020. Apart from performing Corruption Risk Assessment, we have mandatory online learning modules for all directors and employees as well as conducted virtual briefing sessions for key associated persons to create greater awareness on PETRONAS' anti-bribery policy and procedures.
In addition to the above, PDB also implemented a structured approach in conducting our assurance programmes with more emphasis on ownership and accountability within PDB for reasonable assurance to stakeholders through implementation of Integrated Assurance.
PDB has also enhanced its Limits of Authority focusing on addressing its new business requirements and strengthening key strategic areas of decision making to ensure efficient and focused execution across the organisation.
PDB is committed to upholding the confidence and trust of our shareholders and we maintain a robust investor relations programme to ensure that they receive timely information about all material developments in our company. Our investor relations activities are led by the MD/CEO and CFO, ensuring that investors and analysts have access to the key decision-makers, giving them direct insight into our company. This framework helps maintain confidence within the local and international investment communities.
In 2020, we ensured that communication lines with local and foreign investors remained open despite the challenges caused by the COVID-19 pandemic. With limited opportunities for physical meetings with investors and analysts, we stepped-up our virtual engagements and ensured that the quality of disclosure in these meetings continued to meet the high standards expected from PDB.
During the year, we were able to conduct 1 face-to-face Analysts Briefing prior to the MCO being implemented by the government in February 2020 and 3 virtual Analyst Briefings in the following quarters. The effectiveness of our technological solution was validated when, in a first for our company, PDB's 38th AGM was held virtually on 10 June 2020 in accordance with the Securities Commission Guideline on Virtual Meetings by Listed Issuers, which was issued on 18 April 2020. We are committed to maintaining the highest quality of engagement with the investor community as we go forward.
Outlook
The outlook for the year ahead is broadly supportive of a recovery for the global oil and gas industry and for the Malaysian economy. However, the still ongoing COVID-19 pandemic remains a key risk. Accordingly, even as we are positioned to capitalise on a recovery, we have also taken strong measures to deal with continued volatility. Our retail segment will continue to focus on growing non-fuel income and leveraging on technology as a growth-driver.
Our commercial segment, which remains affected by the international travel restrictions, will continue to capitalise on opportunities in domestic air travel and seek cost-efficiencies.
Going forward, our company will maintain the strong cost discipline and prudent management of working capital and liquidity that we implemented in 2020, in order to ensure the robustness of our balance sheet. Building on this solid foundation, we will continue the process of transforming our organisation and culture in order to build a genuinely future-proof business that continues to deliver sustainable returns for our shareholders.
RESPONDING TO THE IMPACT OF
CVID-19
Overview
The COVID-19 pandemic was the single most impactful factor upon the global economy and our business operating environment in 2020. The rapid global spread of the virus in the first quarter of the year resulted in a near-total halt to global travel and widespread national lockdowns. The resulting plunge in economic activity saw global GDP shrink by 3.5%. Domestically, Malaysia's GDP shrank by 5.6%.
Globally, the gradual lifting of the lockdowns and travel restrictions in the second half of the year, coupled with widespread government stimulus spending helped spur a revival in economic activity and fuel demand. In Malaysia, the economy picked-up with the relaxation of the nationwide MCO that had been imposed in March and the government's stimulus measures, helping revive domestic demand for oil and gas products.
The pandemic has also driven changes in customer behaviour, as fear over the spread of the virus and mandated social distancing rules, has led to reduced in-person transaction, accelerating a move towards e-commerce.
The financial impact upon PDB was felt, principally, through the fall in sales volume. Domestic and international travel restrictions resulted in lower demand for its key products including petrol and jet fuel. Additionally, demand for Diesel also dropped as a result of the contraction in domestic industrial activity. This resulted in PDB's total fuel sales volume declining by 22.9% in 2020.
How We Responded
On the financial front, PDB responded rapidly to this challenging macro-environment by streamlining both our OPEX and CAPEX to maintain the strength of our balance sheet.
At the same time, PDB also accelerated the diversification of its product portfolio to future-proof its business in response to the shift in consumer behaviour.
By expanding food offerings at stations through Makan@Mesra and rapid nationwide roll out of Setel®, PDB has effectively latched on to the rising need for on-the-go-food and contactless payment. Additionally, PDB launched PRYSM, PETRONAS motorsport and lifestyle brand. On the fuel business front, we expanded ROVR, Malaysia's first mobile refuelling partner. PDB also rolled-out its Gas Retailing and Transportation off-grid delivery service, offering Malaysia's first off-grid LNG delivery service to expand its clean fuels business.
For more information on the financial impact and our response, please refer to the MD/CEO's Statement on pages 32 to 38 and the CFO's Review on pages 39 to 43 of this
The pandemic had a profound impact upon PDB's business operations. The introduction of the MCO in March led to restrictions on opening hours for its PETRONAS stations, limits on the number of people who could be in Kedai Mesra at any one time and the need to maintain strict social distancing while continuing to operate its business and deliver a high level of customer service. PDB also faced the challenge of managing inventory volumes in the fluctuating operating environment.
How We Responded
PDB took swift and decisive action to strengthen health and
safety SOPs across its business to ensure the safety and
well-being of its employees, customers, partners and the
communities in which we operate. We adopted stringent
procedures in-line with the government's mandate and
international best practices.
At the station level, the SOPs included the regular sanitisation of all PETRONAS stations, the ready availability of hand sanitiser for customers and employees, the use of face masks, adherence to social distancing rules and controlling the number of customers allowed into the Kedai Mesra at one time.
PDB also responded to evolving customer behaviour by expanding its Setel® e-payment platform nationwide and added features to widen its use. Alongside that, we expanded ROVR, Malaysia's first mobile refuelling partner, reducing the need for customers to conduct in-person transactions.
At the corporate level, it enabled a high degree of working from home, both to facilitate social distancing and also in recognition of raised family and domestic obligations. The Company's ability to adapt to working from home and other forms of online working is a testament to the robustness of the digital systems that it has put in place over the last year.
Additionally, PDB worked to maintain optimal levels of fuel inventory to meet the fluctuating demand over the course of the year. The Company was able to maintain visibility into customer demand and projected product availability through the effectiveness of its integrated inventory management committee meetings.
Across the board, PDB also ensured that its customers did not experience supply disruptions by ensuring safe operations in its terminals and LPG bottling plants, and among its transportation partners and dealers. Together, these measures ensured its operational continuity during the most challenging year that it has faced.
Impact to our Stakeholders
Shareholders and the investment community
Restrictions on travel and the need for social distancing required
PDB to reshape the way that it interacted with shareholders and
the investment community. For the first time, PDB held a virtual
AGM on 10 June 2020, in accordance with the Securities
Commission Guidelines on Virtual Meetings by Listed Issuers that
had been issued in April 2020. It also used technology to engage
with the investment community throughout the year. While the
Company was able to conduct 1 face-to-face Analysts Briefing
in February, prior to the implementation of the MCO, the
subsequent 3 quarterly Analyst Briefings were conducted virtually.
Customers
PDB's customers were affected by reduced mobility under the
lockdowns and travel restrictions, leading to a fall in demand
for its products. Commercial customers were also affected by
the various restrictions on business activities during different
stages of the MCO. In response, the Company worked closely
with customers to ensure the sustainability of their businesses.
PDB's engagement with retail customers was impacted by the
restrictions on trading hours, their reduction in face-to-face
interactions and limits on the number of people allowed into
the Kedai Mesra. In response, it expanded the availability and
features of the Setel® e-payment system and diversified its
Mesra offerings to keep customers engaged.
Employees
The Company's employees were impacted by the pandemic
in a myriad of ways. Across the board, they faced diminished
mobility and having to familiarise themselves with new SOPs.
Additionally, many had to rapidly adapt to new modes of
working as a result of working from home. PDB responded to
this situation by providing them with support, in-terms of
training to prepare them for the new SOPs and modes of
working, as well as supporting those working from home by
providing them with the required digital support.
Rakan Niaga/Dealers
PDB's Rakan Niaga were negatively impacted by the decline
in demand for fuel, as well as by the restrictions on the
operations of Kedai Mesra during the MCO, in accordance with
government mandated SOPs. PDB responded by helping them
build capacity and actively worked to strengthen the offerings
at Kedai Mesra. Through the wider roll-out of Setel®, the launch
of the new Kedai Mesra concept, the expansion of its
collaboration with Tealive and the launch of the new, improved,
PETRONAS Primax 97 with Pro-Race, the Company helped
mitigate the impact of the pandemic and the MCO upon our
Rakan Niaga.
Business Partners and Vendors
PDB's business partners and vendors were negatively impacted
by the dampened overall economic environment. A number
of key partners and vendors also faced disruption to their supply chains as a result of the travel restrictions, causing delays to the timelines of several PDB projects. Against the challenging backdrop of 2020, PDB worked closely with its business partners to ensure the robustness of its procurement ecosystem and project delivery capacity.
Authorities/Regulators
The negative impact of the COVID-19 pandemic on PDB's sales and profitability resulted in a reduction in the overall direct taxes that it paid in 2020.
PDB also provided direct support to the nation's frontliners by contributing shopping vouchers, snacks and coffee to 18 critical organisations across the country. These included 15 hospitals, the Royal Malaysian Police, the Ministry of Health and the National Disaster Management Agency. We provided further support to frontliners by providing them with free oil-change services at the mobile car service workshops that it set-up at three hospitals.
Communities
The negative impact of the COVID-19 pandemic has been visible across society as whole, with many Malaysians seeing reduced job security, diminished incomes and many young Malaysians, in particular, facing a much more challenging job market. PDB responded to this scenario by redoubling its effort at good corporate citizenship, supporting the communities in which it operates and making a contribution at the national level.
In 2020, PDB redoubled its efforts to promote entrepreneurship and boost local businesses hit by COVID-19. PDB's SME programme continued to support over 350 vendors supplying Kedai Mesra across the nation. In addition, the Company's Love Local Campaign drew more than 80 local brands, which supported local talent and local products.
Additionally, PDB worked with its Rakan Niaga to support local communities across the country by organising food banks and food giveaways for the most vulnerable.
Beyond responding to immediate needs, PDB continued to support communities and efforts at nation-building by giving opportunities to talented youth. In a year when many fresh graduates faced reduced employment opportunities, the Company took on-board 20 new graduates, out of the 200 taken-on by the PETRONAS Group as whole under its Protégé programme. In addition to that, PDB provided structured internships to 101 students, helping prepare them for future employment.
For more information on how we supported communities facing the impact of COVID-19 pandemic, please refer to our Sustainability Report on pages 239 to 242 of this
For more information on how our business divisions responded to the impact of COVID-19, please refer to our Business Reviews on pages 86 to 111 of this
The impact of the COVID-19 pandemic will continue to be felt across 2021. The availability of vaccines, the eventual lifting of lockdowns and the gradual, if limited, restoration of international travel are all supportive of a stronger economic performance in the year ahead. However, the risk of a resurgence of the pandemic and of renewed disruption remain real and PDB continues to take measures to future-proof our organisation, as detailed throughout this report.
OUR APPROACH TO VALUE CREATION
ASSESS AND EVALUATE OUR
OPERATING CONTEXT
ANALYSE BUSINESS LANDSCAPE
Our ability to create value is closely related to the macroeconomic environment within which we operate. The challenges presented by the external environment impacts our performance and business continuity, risk management and our strategy to create value.
Our performance and Value Creation are inextricable linked to the challenges presented by economic, regulatory, social, environmental and competitive environment of the operating landscape.
For more information on the Operating Environment and Market Outlook, please refer to pages 53 to 56 of this
We are committed to effective risk management, identifying the risks and opportunities presented by our business landscape whilst pursuing our strategic and business objectives, with the ultimate aim of ensuring sustainable value creation for our stakeholders.
For more information on the Key Risks
and Mitigation, please refer to pages 61
to 65 of this
STAKEHOLDER ENGAGEMENT
It is vital for us to understand and respond to the needs, interests and concerns of our stakeholders. Our success and sustainability is dependent on the relationships we build. Quality relationships allows us to deliver sustained value to all our stakeholders and determine the continued success and growth of our business.
Our Key Stakeholders
InvestorsCustomers
Rakan Niaga
/DealersEmployeesAuthorities/
RegulatorsContractors/
Suppliers/
Business PartnersCommunities
For more information on Stakeholder Engagement, please refer to pages 50 to 51 of this
DEFINE OUR MATERIAL MATTERS
OUR 3-STEP MATERIAL IDENTIFICATION
PROCESS INCLUDE:
FORMULATE BUSINESS STRATEGY
IMPLEMENTING OUR STRATEGY
Responding to emerging market trends and the challenging business landscape, our strategies are devised to drive PDB's transformation plan to strengthen our core business and ensure value creation.
Digitally Enabled
Our MATERIAL MATTERS are issues that have the potential to impact, both positively and negatively, our value creation in the short, medium and long term. These material matters are aligned with our risk profile. Managing them effectively could support or hinder our ability to execute our strategy and remain competitive. We have also identified opportunities per
Material Issue and how these are viewed as growth opportunities for the Group through its strategic long-term plan.
For more information on the Material Matters, please refer to pages 57 to 60 of this
Our strategic direction and execution are guided by our 3 Strategic Pillars, to achieve our vision of being a progressive energy and solutions partner, enriching lives for a sustainable future.
Great Place to Work
PDB's approach to value-creation is driven by our values as a company and is in alignment with PETRONAS Group's overall strategy. As we mark the conclusion of the transformation journey that we began in 2018, we are now embarking on the next phase of our strategy, which is anchored on the goal of future-proofing our organisation by focusing on 3 main pillars:
• Value: which means sustaining the strength of our current businesses.
• Growth: which will be achieved by continuing to diversify our business in the non-fuel sector and capitalising on the energy transition.
• Sustainability: which entails striking a balance on our triple bottom line of people, profit
and planet.
Together, these three pillars anchor our strategy to future-proof our organisation in an increasingly challenging business landscape.
ALLOCATE OUR
RESOURCES
EMBEDDING GOOD GOVERNANCE
INTEGRATE INTO OUR
BUSINESS MODEL
DRIVING OUR BUSINESS ACTIVITIES
OUR VALUE CREATING BUSINESS MODEL
Our business lines and enablers are committed to delivering innovative and differentiated offerings to fuel the nation's growth. Driven by our customer-centricity, digitalisation and agile ways of working with sustainability at the core, we strive to elevate the customer experience in the new normal, underpinned by our commitment to make their everyday lives simpler and better.
Business Activities
E
A
B
L
I
N
G
SE
R
N
VICES
RETAILCOMMERCIALDIGITALLY ENABLED
OUR PROMISE
MAKING YOUR EVERYDAY LIFE SIMPLER
AND BETTER
VENTURE BUILDER
LUBRICANTLPG
CAPITA
LEMEMANAG
For more information on Our Value Creating Model, please refer to pages 48 to 49 of this
CREATING VALUE AND DELIVERING A POSITIVE IMPACT
Our Board is committed to ensuring that there is a strong and effective system of corporate governance in place to support the successful execution of the Group's strategy, as well as continue to create and protect value ensuring the sustainability of our business.
OUR VALUE CREATING MODEL
UNDERPINNED BY: PETRONAS CULTURAL BELIEFS
CUSTOMER FOCUSED
INNOVATE NOW
STATEMENT OF PURPOSE
A progressive energy and solutions partner enriching lives for a sustainable future.
OUR PROMISE
Pushing the boundaries of technology and innovation is what we do. But why we do it, who it's for, matter just as much. We strive to be a part of our customers lives in ways that matter. This requires evolving beyond traditional offerings and services.
By delivering on present needs and anticipating future ones, we continuously create progressive solutions that are relevant to our customers' changing needs.
This is our dream for a simpler, better and more meaningful tomorrow for all. Brought to life with the power of progress.
FINANCIAL
MANUFACTURED
Relates to the source of our capital derived from operations and equity.
• Shareholders' Equity: RM5,643.7 Million
• Cash: RM2,691.8 Million
Refers to our physical and digital infrastructure.
INTELLECTUAL
• PETRONAS stations: >1,000
• Kedai Mesra: >800
• Total Terminals: 38
• ROVR Trucks: 14
• LPG cylinders: >11 million cylinders
• LNG
Refers to intellectual assets such as our brand and franchise value, research and development, innovation capacity, reputation, as well as strategic partnerships.
• PETRONAS range of fuel
• PETRONAS range of lubricant
• Products under Mesra brand
• Setel®
• ROVR
• PRYSM
• PETRONAS LNG
OUR STRATEGIC PRIORITIES
MATERIAL MATTERS
MARKET LEADERSHIP
HEALTH, SAFETY AND ENVIRONMENT
SAFE, RELIABLE AND EFFICIENT
SEAMLESS AND FRICTIONLESS CUSTOMER EXPERIENCEGREAT PLACE TO WORK
PERFORMANCE MANAGEMENT SOCIAL CAPITAL
DIGITALLY ENABLED
HUMAN CAPITAL CONDUCT AND TRUST
OUR RISKS HSE RISK FINANCIAL RISK OPERATIONS RISK TECHNOLOGY RISK STRATEGIC RISK TALENT RISK PANDEMIC RISK REGULATORY RISK
SUPPORTED BY ROBUST GOVERNANCE FRAMEWORK
BE ENTERPRISING
SPEAK UP
COURAGE TO ACT
CAPITAL INPUTS
VALUE CREATED FOR OUR STAKEHOLDERS
SOCIAL AND RELATIONSHIP
NATURAL
Reflects the strong relationships which we have with all our stakeholders who have contributed towards fuelling our growth.
• Rakan Niaga/Dealers: ~900
• Established dealers: >1,200
• Business partners/suppliers/contractors/ vendors: >650
• Authorities
Refers to the electricity, fuel, water and other natural resources required to deliver our products and services to our customers.
• Total fuel usage: 21,045,851 litres
• Total energy usage: 156,036,773 kWh
• Total water usage: 88,400 m3
CORPORATE GOVERNANCE AND BUSINESS ETHICS
INVESTORS
• Superior and consistent return on investment
• Strengthened our position in FTSE4Good Bursa Malaysia Index since 2015
• RM606.0 million dividends paid to shareholders
CUSTOMERS
• Implementing high SOP standards in protecting the safety of our customers during the COVID-19 pandemic
• Fueling customers with our high quality and innovative petroleum products
• Ensure reliable and security of supply to our industrial customers
• Providing services and convenience to customers at our PETRONAS stations
DEALERS, CONTRACTORS/SUPPLIERS AND BUSINESS
PARTNERS
• Protecting the safety of our Dealers, Contractors/Suppliers and Business Partners
• Develop local businesses and provide spin-off employment opportunities
• Provide long-term partnership opportunities for sustainable growth
• Cultivate capabilities of our business RM18,719.1 million payments to contractors/suppliers/business partners
EMPLOYEES
• Protecting the safety of our employees by implementing high SOP standards during the COVID-19 pandemic
• Create conducive working environment and rewarding employment
• Provide opportunities for progression and personal development
• Provide equal opportunities, personal development and improvement as well as career progression
• RM275.0* million paid for salaries and benefits
• 12.5% employees promoted
• RM1.5 million training investment
• 32.0%** female representation
*excluding training cost **PDB Group
AUTHORITIES/REGULATORS
• Compliance with regulatory requirements
• RM162.6 Taxes paid to Government
Various forms of COVID-19 donations for Frontliners:
• PETRONAS Coffee Break Campaign
• Complimentary Engine Oil Change
• Mesra Mineral Water
• Mesra Bites Buns
COMMUNITIES
• Provide local economic opportunities through employment, business partnerships and entrepreneurship
• Provide sponsorship through CSR and support to uplift their livelihood
CSR Activities:
• PETRONAS Coffee Break Campaign
• PROTEGE Programme
• Ramadan Community Service
STAKEHOLDER ENGAGEMENT
Stakeholder engagement is an important aspect for PDB in identifying and understanding the expectations of our stakeholders. As Malaysia's leading retailer and marketer of downstream petroleum products, we have a broad range of stakeholders with, sometimes, competing interests. Each group in our spectrum of stakeholders have their own unique areas of interests, due to the different ways they are impacted by our business.
To understand our stakeholders' needs and interests, and effectively build positive and meaningful relationships with them, we have adopted the Stakeholder Management Process as guided by PETRONAS Group Strategic Communication. Beyond the regular engagements that arise in the course of our business, we also engaged with our key stakeholders in validating our Material Matters, allowing us to integrate the results of our stakeholder engagement into every step of our value creation process as shown below.
INVESTORS
Why We Engage
To provide fair, balanced and timely material updates to maintain trust and confidence as well as to allow infomed decision making
Areas of Interest
• Economic outlook
• Business outlook and risks
• Operational efficiencies
• Cash utilisation and dividends
• Governance and business ethics
• HSE
CUSTOMERS
**Engagement Platform
• Quarterly results announcement
• Quarterly analyst briefings
• Group and one-on-one meetings
• NDRs and corporate conferences
• Corporate website -www.mymesra.com.my
• Periodic reports - Annual and Sustainability Reports
• Bursa Link under IR's Events and Announcement onwww.mymesra.com.my
Frequency of Engagement:
• Quarterly
• Annually
Why We Engage
As a customer centric organisation, we must understand the needs and behaviour of our customers to ensure we win them over and deliver solutions to delight them
Areas of Interest
• HSE
• Customer experience
• Operational efficiencies
• Strategic Direction, Business Growth, Performance and Opportunities
• Products quality and availability
RAKAN NIAGA/DEALERS
**Engagement Platform
• Events, dialogues, roadshows and engagements
• Email
• Hotline - PETRONAS Mesralink at 1-300-88-8181
• Social Media Platform (YouTube, Facebook, Instagram, Twitter)
• Corporate website -www.mymesra.com.my
• Customer feedback system via QR code at PETRONAS stations and mobile applications
Frequency of Engagement:
• Day-to-day
• Periodic engagements
• Annually
Why We Engage
Rakan Niaga/Dealers are our critical business partners and an extension of our network. We must ensure our strategies and business plans are aligned
Areas of Interest
• Strategic Direction, Business Growth, Performance and Opportunities
• Technology and digital transformation
• Cyber Security
• Governance and Business Ethics
• Sustainability matters
• Human Rights
• HSE
• Workforce Development
• Economic Outlook
* Fully virtual engagement
**Engagement Platform
• Dealer Conferences, Events, dialogues, roadshows and engagements
• Training sessions
• Emails
• Corporate website -www.mymesra.com.my
• Hotline - PETRONAS Mesralink at 1-300-88-8181
• Retail dealers -www.mystation.com.my
** Combination of both virtual and physical engagement with strictly adhered to SOP guidelines
Frequency of Engagement:
• Weekly
• Monthly
• Quarterly
• Annually
• Regular interactions
EMPLOYEES
Why We Engage
We cascade business direction and performance while enabling open communication to ensure employees are engaged and highly motivated
Areas of Interest
• Strategic Direction, Business Growth, Performance and Opportunities
• Work-life Balance
• Capability and Career Development
• Welfare and Benefits
• HSE
AUTHORITIES/REGULATORS
*Engagement Platforms
• Townhall and Engagement Sessions
• Dialogues and Feedback Sessions
• Training Sessions
• Union Management
• Messages through Video, Newsletter, Intranet and Email
Frequency of Engagement:
• Monthly
• Quarterly
• Periodic engagements
Why We Engage
We operate in accordance with all regulatory requirements to ensure our operations are safe and not disrupted
Areas of Interest
• Regulations and Policies
• Product Specifications
• HSE
• Environment and Climate Change
• Corporate Social Responsibility
• Human Rights
• Governance and Business Ethics
• Formal Meetings
• Dialogues and Feedback Sessions
• Periodic Reports
• Bursa Link under IR's Events and Announcement onwww.mymesra.com.my
CONTRACTORS/SUPPLIERS/BUSINESS PARTNERS
*Engagement Platforms
Frequency of Engagement:
• Periodic engagements
• Monthly
• Quarterly
• Annually
Why We Engage
Engaging with our partners and supply chain providers means that we can ensure effective business collaboration, including upholding our safety standards and compliance
Areas of Interest
• Strategic Direction, Business Growth, Performance and Opportunities
• Technology and Digital Transformation
• Cyber Security
• HSE
• Products Availability and Services Quality
• Regulations and Policies
• Governance and Business Ethics
• Human Rights
COMMUNITIES
**Engagement Platforms
• Email
• Formal Meetings
• Dialogues and Feedback Sessions
• PETRONAS Mesralink at 1-300-88-8181
• Periodic Reports
• Annual Dealer Conference
• Training Sessions
Frequency of Engagement:
• Day-to-day engagements
• Quarterly
• Periodic engagements
• Regular interactions
Why We Engage
Ensures continued viability of the business into the long-term. We aim to enrich the lives of the communities in which we operate and protect the environment
Areas of Interest
• CSR
• HSE
• Regulatory Compliance
• Environment and Climate Change
• Local Content and Employment Opportunities
**Engagement Platforms
• Community Engagement and Outreach Programme
• Corporate website -www.mymesra.com.my
• Hotline - PETRONAS Mesralink at 1-300-88-8181
• PETRONAS brands social media accounts (Facebook, Twitter, Instagram and YouTube)
Frequency of Engagement:
• Ad-Hoc
Our aim to continue generating sustained value for our stakeholders depends on our capacity to negotiate the rapidly-evolving landscape in which we operate. 2020 was a year of unique challenges, with the impact of the COVID-19 pandemic felt across all areas of the operating environment and emerging trends in the energy industry and evolving technology continuing to reshape the market for our products.
OPERATING ENVIRONMENT AND MARKET OUTLOOK
1
MARKET TREND
As a fuel retailer, our performance is strongly impacted by crude oil prices.
Energy prices experienced major volatility in 2020 as a result of the lower demand due to the COVID-19 pandemic, coupled with a price war between major oil exporting countries that began in March. As a result, the benchmark Brent price plunged to USD13.24 per barrel in April, its lowest price in almost 20 years, which had a strong negative impact on the oil and gas industry worldwide.
The crash in the oil price in the first half of the year saw pump price for petroleum products in Malaysia fall to about 40.0% of the level seen at the start of the year. For the year as a whole, PDB saw a 38.2% decline in revenue compared to 2019, directly impacting our bottom line.
Energy prices rebounded gradually throughout the 2nd half of the year after the the OPEC+ group agreed on a monumental cut of 9.7 million barrels per day. Despite the resulting stronger second-half, however, Brent only achieved an average price of USD41.68 per barrel in 2020, which was 34.9% lower than the USD64.00 per barrel averaged in 2019. Nevertheless, the promising news of COVID-19 vaccine provided the much needed respite in Quarter 4 and supported the price recovery to finally break the USD50.00 per barrel mark by December since the drop in March.
PDB continued to diversify our earnings base by growing our non-fuel business by introducing Makan@Mesra to catch the trend for Ready-to-Eat and Ready-to-Cook meals and the sales of official PETRONAS merchandise through our PRYSM online store. We also exercised more prudent inventory management vis-a-vis current market demand to minimise the exposure to oil price fluctuations.
Jan
FebMar
AprMayJun
Jul
AugSep
Oct
NovDec
Source: U.S. Energy Information Administration (EIA)
ENERGY PRICE VOLATILITY
OUTLOOK
Crude oil prices are projected to continue rising in 2021. However these projections are dependent on the effectiveness of the ongoing global response to COVID-19. Recognising the ongoing risk from oil price volatility, PDB will continue our emphasis on growing its non-fuel revenue and the launch of higher-margin products. We also continue to ensure that inventory levels are maintained at optimal levels.
2
MARKET TREND
The pace of global consumer and digital adoption is estimated to have moved five years forward in the first quarter of 2020 alone, in response to the challenges and restriction imposed by the COVID-19 pandemic.
This rapid acceleration in the digital economy comes on top of the already strong global growth that it has experienced over the last decade. In Southeast Asia, the online population jumped by 40 million in 2020, to nearly 400 million users, of which about 90.0% uses mobile internet, vastly expanding the potential e-commerce marketplace. At the same time, the COVID-19 pandemic has driven a massive and permanent surge in digital adoption, where more than one third of the digital services consumers are new consumers. Of these, 90.0% intend to continue their newfound habits after the pandemic.
Widespread internet access in Malaysia facilitated an 87.0% year-on-year surge in gross merchandise value for the e-commerce sector in 2020, in response to the government-mandated lockdowns and fears over the spread of COVID-19. This was the highest e-commerce growth-rate in Southeast Asia and digital industry leaders believe that the country's shift to online transactions will outlast the COVID-19 pandemic, with Malaysia's digital economy expected to hit RM125 billion by 2025.
Total Internet Users In SEA
2015
2019
2020
e-Commerce GMV (US $_B)
23.0%
172
63.0%
Being Digitally Enabled has been one of the legs of PDB's growth strategy under our Transformation Journey. Setel®, an innovative platform that provides every motorist a seamless experience for retail on-the-go, experienced exponential growth as we rolled it out nationwide and expanded its functionality. We also strengthened our e-commerce offerings by providing customers with a delivery option at Kedai Mesra. We continued to accelerate the pace of embedding technology more deeply into our stations and other points of contact with customers in order to deliver a more seamless experience. We also enhanced digital support for our employees to enable effective Working From Home arrangements.
5 2015
2019
2020
2025
Source: Bain & Company
OUTLOOK
The pandemic has sped-up a lasting shift by businesses and the public to relying on online services. Additionally, under the newly-launched Malaysia Digital Economy Blueprint (MyDigital), the digital economy is expected to contribute 22.6% to the country's GDP by 2025. We will continue to build capabilities around the e-commerce space, leveraging on data and analytics and accelerating our digitalisation of business on all fronts to ensure our organisation phases smoothly into Industrial Revolution 4.0. Our customer and business data security and privacy remains one of our topmost priorities, and we take cyber security threats seriously. Accordingly, we continuously adopt best practices to strengthen the safety of customers' data.
ACCELERATED DIGITALISATION
OPERATING ENVIRONMENT AND MARKET OUTLOOK
3
MARKET TREND
The single largest macro-trend impacting the operating environment for oil and gas companies is the ongoing transition towards renewable energy. The global shift away from fossil fuel-based systems of energy, such as oil, gas and coal, towards renewable sources such as hydro, wind, solar and biofuels is producing a secular shift in patterns of energy demand and consumption. This transition is being driven by a combination of technological advancement, growing price competitiveness, tighter environmental regulation and changing consumer preferences.
Figure 1: Global energy transition investment, 2001-2020
$ billion
Despite the global economic slowdown and energy price volatility, worldwide investment in the Energy Transition accelerated in 2020, crossing the USD500 billion mark for the first time. The number of electric vehicles on the road globally has also now crossed 10 million, and the pace of adoption is set to continue accelerating. Similar trends can also be observed in the aviation and marine sectors though the development of Sustainable Aviation Fuel and the switch to LNG and Low-Sulphur Fuel Oil. These trends negatively impact demand in the traditional fuel sales that still form the core of PDB's business.
600
501
500
Hydrogen
400
CCS
300
Energy storage
200
Electrified transport
Electrified heat
100
Renewable energy
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Sourse: BloombergNEF. Note: electrified heat figures begin in 2006; electrified transport in 2016; hydrogen and CCS in 2018.
Source: BloombergNEF
PDB is committed to growing our sustainable fuel portfolio in line with government policies and evolving customer interest. We have become the first LNG solutions provider using road trucks for off-grid customers in Peninsular Malaysia and introduced our LNG bunkering business, giving our customers more flexibility for their energy requirement. We also have ChargEV charging facilities at 61 locations nationwide. At the same time, we expanded our offerings of eco-friendly products at the station by providing the new standard of B20 grade (containing 20.0% palm oil methyl ester) biodiesel under the PETRONAS Dynamic Diesel and Euro 5-compliant PETRONAS Dynamic Diesel Euro 5 with Pro Drive.
THE ENERGY TRANSITION
OUTLOOK
The pace of the global energy transition is set to accelerate with increasing amounts of investments and projects around the world. PDB will continue to observe the changes in regulatory requirements and customer trends, and future-proof our businesses by offering cleaner fuel solutions to the customers.
MATERIAL MATTERS
The Group's strategies and decisions are based on material matters that influence the achievement of business objectives. They are the principal economic, social and environmental issues that give rise to opportunities and risks that have the most impact on our ability to create sustainable value for our stakeholders. Our aspiration, however, goes beyond the expectations of our stakeholders by delivering innovative and future-proof solutions. The table below describes the management's approach to addressing these matters for optimal long-term growth.
Evaluating importance of Material Matters to us and our stakeholders
Subsequent evaluation on the level of importance of these material matters based on submissions to the Board and Leadership Team as well as our internal risk metrics.
Reviewing Material Matters
Revisiting the materiality process ensure we effectively capture the issues, risks and opportunities which are most important to our stakeholders and our business' ability to create value over time.
Internalising Material Matters to business strategy
Usage of prioritised material matters to craft our business strategy which is reflected in the four strategic priorities of (1) Market Leadership, (2) Safe, Reliable and Efficient, (3) Great Place to Work and (4) Digitally Enabled.
HEALTH, SAFETY AND ENVIRONMENT
WHY IT IS IMPORTANT TO US
Good HSE records will enhance reputation for corporate responsibility among investors, customers, and communities, reduce the threat for legal action and boost staff morale and motivation. We will continue to focus on enforcing good HSE practices and inculcating a work culture which prioritises health and safety, both physically and mentally, as well as minimises HSE risk. This is particular important during the pandemic in order to curb the infection during the course of our business operations.
WHAT ARE THE RISKS
COVID-19 pandemic introduced more stringent safety and health requirements. Failure to adequately manage HSE risks may result in injury and health issues to our customers, dealers, employees, contractors/suppliers, business partners, communities and impact the surrounding environment. It may also cause disruption to our operations, increase costs, cause reputational damage and/or litigation.
WHAT ARE THE OPPORTUNITIES
By having a strong HSE performance, prioritisation of areas for continuous improvement, and ability to quickly adapt to new operating environment, we maintain safe and reliable operations which provides us with a competitive edge in the market while managing its impact to our stakeholders and the environment. Attention to our stakeholders' safety, health, security and well-being will be an opportunity for us to continuously operate in safe and responsible manner.
OUR RESPONSE
PDB prioritises HSE and aims for Zero HSE incidents. We duly recognise our corporate responsibility as a player in the global energy sector to balance the issue of climate change with the challenge to sustainably produce affordable and reliable energy.
Our team has swiftly responded to the crisis in ensuring the safety of our staffs, dealers, partners and customers are not compromised during this period e.g. frequent sanitisations, social distancing at our facilities, and support system to our employees during the WFH period.
MATERIAL MATTERS
SEAMLESS AND FRICTIONLESS CUSTOMER EXPERIENCE
WHY IT IS IMPORTANT TO US
It is important that our evolving customers' requirements and preferences be addressed as they are the key to our business success. This includes all aspects such as product quality, delivery, differentiated offerings and convenience.
WHAT ARE THE RISKS
Addressing the evolving customers' needs and expectations are critical in maintaining our competitive position and to promote growth. We must be quick to adapt to the changing customer's behaviour and digital advancements in order to meet the needs and provide convenience to our customers especially in the next normal. Exposures arising from cyber threats may also lead to a breach of information security and adversely impact our business operations.
WHAT ARE THE OPPORTUNITIES
By offering products of unparalleled quality, high levels of service delivery, as well as listening to our customers' concerns, we establish strong differentiating factors to appeal to our customers, ensuring excellent customer experience during the next normal. Leveraging on technology advancements provide an avenue for differentiated solutions and increase efficiency for our customers while tapping into the new low-touch economy. This will help us protect our position in core markets as well as extend our reach into emerging markets.
OUR RESPONSE
Delivering superior customers experience is a strategic priority for PDB, expanding our offerings to cater for the new rising customer's need, while transforming customers experience through digitalisation initiatives and collaboration with partners in order to promote low touch economy and ride on the e-commerce uprising.
VALUE CREATION MEASUREMENTS
• Continuous Setel®'s features enhancement including Setel4Me, Deliver2Me, and Setel® at Kedai Mesra
• New Outdoor Payment Terminal and Cloud-based Point-of-Sales Terminal roll-out
• New offerings: PETRONAS Primax 97 with Pro-Race, Makan@Mesra, LPG@ Sundry Shop, LNG Virtual Pipeline System
PERFORMANCE MANAGEMENT
WHY IT IS IMPORTANT TO US
Operational efficiencies are critical foundations in delivering business objectives and performance towards achieving sustainable levels of growth and profitability, especially during an economic downturn. PDB's profitability and ability to sustain its performance correlates strongly to changes in the economic environment.
WHAT ARE THE RISKS
We must ensure timely response to changes in economic and market environment to remain competitive as well as to deliver our strategy and performance. Robust cashflow and inventory management is required to ensure healthy financial during crisis. Operational and reliability interruptions including non-availability of supply and services could lead to business disruption and financial loss.
WHAT ARE THE OPPORTUNITIES
Striving for operational efficiencies ensures a competitive advantage for our brands in the market. Maintaining healthy cashflow by cutting unnecessary expenses and optimising value chain ensures the Company remains afloat during times of crisis. The ability to respond quickly to market changes and having flexibility in our strategy allows us to capitalise on new emerging trends from the next normal and take advantage of lagging competitors' response.
OUR RESPONSE
Concerted efforts have been made to improve operational excellence and reliability, and this continues to be a strategic priority for PDB. Our strategy is designed to maximise cash generation, fuel growth and set the trajectory moving forward.
SOCIAL CAPITAL
WHY IT IS IMPORTANT TO US
PDB recognises the value and impact of our business in the social ecosystem that we operate in. We are committed to operating safely, responsibly and reliably, and aligning our practices with acceptable business norms and the industry's benchmarks. We support the development and well-being of the communities around us.
WHAT ARE THE RISKS
It is vital for PDB to continuously behave as a socially responsible organisation, especially during the pandemic crisis. Failure to discharge our responsibility on human rights will infringe on the health, safety and general well-being of the people impacted by our operations.
HUMAN CAPITAL
WHAT ARE THE RISKS
We must attract, develop, and retain the best talents to ensure sustainable business performance and deliver growth.
WHAT ARE THE OPPORTUNITIES
Behaving in a socially responsible manner allows us to support the goals of our stakeholders in creating positive social impact. This opens opportunities for collaboration with social entrepreneurs and enable us to develop the communities and generate a win-win situation for all parties.
OUR RESPONSE
PDB continues to invest in CSR programmes as part of its commitment to contribute back to the people and community residing in areas where we operate in, whom have fueled our growth. We are also committed to avoid complicity in potential human rights violations in our relationships with dealers, contractors, suppliers and the community. In light of the pandemic, we extend our support to the local produce to stimulate domestic consumption.
WHAT ARE THE OPPORTUNITIES
Having the best talents will enable us to be nimble and agile in responding to changes in our operating environment.
OUR RESPONSE
We continuously invest in the development and capability of our people as one of our prime assets to grow together with the Company.
MATERIAL MATTERS
CONDUCT AND TRUST
WHY IT IS IMPORTANT TO US
PDB believes in conducting our business in a manner that emphasises and advances the principle of discipline, good conduct, professionalism, loyalty, integrity and cohesiveness that is critical to the success and well-being of PDB.
WHAT ARE THE RISKS
We must conduct our business in an ethical manner to instil trust to our stakeholders in areas we operate and avoid major losses due to integrity issues. Safeguarding the data and privacy of our customers and our business is paramount in instilling trustworthy relationships.
WHAT ARE THE OPPORTUNITIES
Establishing a corporate culture which inculcates ethical conduct and being respectful of our customers, partners, and company's data privacy and security will enable us to build trust with our stakeholders to uphold our image and reputation.
OUR RESPONSE
PDB has adopted the PETRONAS CoBE, the WBP, the ABC and Data Privacy policies with mandatory training to all our employees which also included the recently issued Guidelines on Adequate Procedures by MACC for defence against corporate liability charges. These policies ensure that the conduct of business of PDB and its employees are consistently carried out ethically and with integrity. This is in addition to oversight from PDB Board for transparent decision making.
VALUE CREATION MEASUREMENTS
• Audits
• Training programme related to CoBE/ABC/Data Privacy/Cyber Security/Corporate Liability
• Certifications
KEY RISKS AND MITIGATION
We are committed to effective risk management whilst pursuing our strategic and business objectives, with the ultimate aim of ensuring sustainable value creation for our stakeholders. Risk management is an integral part of our value-based strategy, our governance and day-to-day operations. Not only do we aim to deal with the uncertainty in the business environment by minimising the downside, we also seek to capitalise on the upside potential to achieve our strategic objectives.
HOW WE MANAGE OUR RISKS
PDB has embedded effective risk management processes across the entire value creation process in all our lines of business. We identify, assess, treat and monitor all risks that could potentially impact our business; including inherent risks as early as possible.
In light of the shift in our operating landscape in 2020, we identified significant key risks and its potential impact whereas necessary actions are taken to mitigate these risks. These risks are mapped onto a risk matrix which specifies the likelihood of the risk and its impact.
For more information on how we manage our risk, please refer to SORMIC on pages 182 to 193 of this
Almost certain
Likely
LIKELIHOOD
Possible
Unlikely
Remote
2 3 4
5 6
1
7
8
1 Health, Safety and Environment
2 Financial
3 Operations
4 Technology
5 Strategic
6 Talent
7 Pandemic
8 Regulatory
Insignificant | Minor | Moderate | Major | Severe |
IMPACT | ||||
Low | High | Very High |
Medium
KEY RISKS AND MITIGATION
Underpinned by a clear risk appetite, the identified key risks are actively managed using a consistent approach across the Company, which is aligned with the strategic objectives. The key developments surrounding these risks are explained below:
Risk Movement:
Stable: The risk is stable as identified mitigations are in place and effective.Increase: The risk is increasing based on the higher risk impact.
Decrease: The risk is decreasing based on the lower risk impact.
RISK MOVEMENT:
DESCRIPTION
The nature of the Company's operating activities covering spectrum of geographic range, operational diversity and technical complexity has exposed us to a wide range of HSE risks such as incidents associated with operating facilities, flammable products and transportation hazards.
Inability to provide safe environments for our workforce and the public while at our facilities, premises or during transportation could cause major issues if a major risk materialises, impacting people, environment, assets and reputation.
The Company remains committed to safe, reliable and efficient operations.
IMPLICATION
• Injuries and health issues to employees, contractors and/or surrounding communities
• Asset damage leading to business disruption
• Potential legal litigation and suspension of license to operate
• Fuel spillage/explosion/fire affecting the environment
MITIGATION STRATEGIES
• Address risks on potential hazards through identified control and preventive measures especially on transport safety, process safety as well as contractor and supplier management
• Heighten safety and compliance culture among employees and Rakan Niaga/dealers/contractors/haulers to achieve and sustain Generative HSE Culture
• Enhance integrity of assets through asset rejuvenation programme
For more information on Managing Environmental Impact as well as Health and Safety, please refer to Our Key Operations on pages 86 to 88 and Driving Sustainability on pages 196 to 247 of this
RESULTS OF MITIGATION ACTIONS
• Significant achievement in HSE performance with zero fatality and major LOPC, signifying PDB's best overall achievement for the last 10 years
Link to:
Strategic Priorities
Capitals
1
HEALTH, SAFETY AND ENVIROMENT RISK
RISK MOVEMENT:
DESCRIPTION
The Company is exposed to various financial risks in the normal conduct of business.
1. Price volatility
Adverse changes in market environment and commodity price volatility will impact the Company's business performance and market competitiveness. Exposure to petroleum price volatility poses a threat to short and medium term profitability.
2. Credit risk
The Company's diverse business makes us vulnerable to the credit worthiness of our customers. Credit risk exposes the Company to potential losses in the event of non-payments by customers.
Link to:
Strategic Priorities
Capitals
2
FINANCIAL RISK
IMPLICATION
• Insufficient cash flow
• Decrease in profit margin
• Bad debt, impairment and/or write-off
MITIGATION STRATEGIES
• Minimise price exposure and improve margins through Integrated inventory management
• Assess the credit-worthiness of all potential customers and Rakan Niaga/Dealers as well as performing credit reviews on existing customers in accordance to Credit Risk Framework and Guidelines
• Close monitoring and reporting of Trade Accounts Receivables to ensure payments are received on timely manner
For more information on Integrated Inventory Management, please refer to Our Key Operations on page 88 of this
For more information on Credit Risk Framework and Guidelines, please refer to SORMIC on page 191 of this
RESULTS OF MITIGATION ACTIONS
• Sustained optimum inventory levels below 11.76 days
• Healthy Average Collection Days
• Minimised credit exposure
3
OPERATIONS RISK
RISK MOVEMENT:
DESCRIPTION
Operational excellence is paramount to the Company for uninterrupted end-to-end supply chain stretching from sourcing to reliable delivery of products to customers. This includes ensuring availability of high quality products at all PETRONAS stations for a superior customer experience.
The Company's value chain may be impacted by operational interruptions, including unavailability of products leading to inability to meet customers' demand.
IMPLICATION
• Financial loss
• Poor product quality
• Litigation/Penalty
• Increase in cost
MITIGATION STRATEGIES
• Enhance operating discipline as well as ensure reliable and timely product delivery
For more information on Reliable Efficient Operations, please refer to Our Key Operations on pages 86 to 88 of this
RESULTS OF MITIGATION ACTIONS
• Sustained optimum inventory levels
• Improvement of timely product delivery from 99.3% to 101.5%
Strategic Priorities
Link to:
Capitals
RISK MOVEMENT:
DESCRIPTION
The Company is exposed to digital infrastructure and system disruptions which may adversely impact our business operations and customer experience. Cyber security risks are anticipated to heighten as our business becomes increasingly digitalised due to reliance on the internet and information technology as increased instances of remote/offsite network access during the pandemic.
Rapid technology advancement has heightened the importance of the Company's IT systems to keep up with the pace of digital adoption. Failure to be at the technological forefront may affect our competitive position.
Link to:
Strategic Priorities
Capitals
4
TECHNOLOGY RISK
IMPLICATION
• Business disruptions
• Opportunity loss
• Inability to operate effectively
• Reputational damage
• Financial loss
• Penalties by authorities
MITIGATION STRATEGIES
• Deliver digital operational excellence through continual improvements in operational standards and industry compliance by implementing stringent controls in cyber security, managing vendor partners and digital project management
• Continuous training on cyber security awareness
• Continuously uplift customer and stakeholder experience
For more information on Operational Excellence, Cyber Security and Modernisation, please refer to Digitally Enabled on pages 107 to 111 of this
RESULTS OF MITIGATION ACTIONS
• Increased visibility in cyber threats monitoring
• Compliance to relevant operational standards
• Deliver efficiencies and cost savings across the organisation by leveraging the power of digitalisation to create superior customer experience
KEY RISKS AND MITIGATION
Risk Movement:
Stable: The risk is stable as identified mitigations are in place and effective.Increase: The risk is increasing based on the higher risk impact.
Decrease: The risk is decreasing based on the lower risk impact.
5
STRATEGIC RISK
RISK MOVEMENT:
DESCRIPTION
1. Market Risk
The ability to sustainably grow and deliver shareholder value depends on the main macroeconomic factors that drive the business strategy. Fluctuations in year-on-year profitability and earnings growth are a result of the adverse changes in the market environment.
2. Competition Risk
The Company operates in a highly competitive and mature market. In order to retain our leading position and sustain our performance, it is vital to differentiate our products and services as well as continuously outperform our competitors.
IMPLICATION
• Reduction in profit
• Loss of market competitiveness
• Financial loss
MITIGATION STRATEGIES
• Diversify earnings base by growing non-fuel business
• Launched a range of new ventures that form part of our future-proofing strategy
• Expand offerings to more eco-friendly products
• Elevate delivery of customer experience and customer centricity
For more information on Our Response and Key Initiatives, please refer to Business Review on pages 86 to 111 of this
RESULTS OF MITIGATION ACTIONS
• Mesra income grew by a commendable 3.6% against 2019
• Accelerated the expansion of Setel® e-payment app and ROVR, Malaysia's first mobile refuelling partner
• Provide access to cleaner energy through PETRONAS 1st LNG solution provider using road trucks for off grid customers in Peninsular Malaysia
• Increase in PETRONAS Primax 97 with Pro-Race sales by more than 10.0% over the corresponding period
Strategic Priorities
6
TALENT RISK
RISK MOVEMENT:
DESCRIPTION
The need for talents with required skills, knowledge and expertise is imperative in delivering PDB's business operations and strategies. In addition, we acknowledge the risk of insufficient talent with new and specific skill sets which might impede the achievement of PDB's strategic growth aspiration.
IMPLICATION
• Loss of competitive advantage
• Loss of intellectual capital resulting from poor talent retention
MITIGATION STRATEGIES
• Robust talent management strategies and plans
• Enhance talent and capability development
• Review succession plan to ensure availability and readiness of suitable successors
For more information on Human Capital please refer to Driving Sustainability on pages 225 to 234 of this
RESULTS OF MITIGATION ACTIONS
• Average Training Man-days per employee of 2.8 days
• Achieved Talent Ratio per Critical Positions of 2.0:1
Link to:
Capitals
Strategic Priorities
Link to:
Capitals
7
PANDEMIC RISK
RISK MOVEMENT: NEW
DESCRIPTION
The COVID-19 pandemic has a significant and prolonged impact on economic conditions, demand destruction and has challenged the way we operate. It also has an adverse impact on our profitability and operations which calls for the need to remain agile as well as constantly adapt to the changing environment to protect our people, operations and business.
IMPLICATIONMITIGATION STRATEGIES
• Developed PDB Pandemic Preparedness and Response Plan
• Strengthen health and safety SOPs across our business and enabled working from home to facilitate social distancing
• Consistent communications and issue alerts on COVID-19 to all employees, dealers and contractors
• Streamline both OPEX and CAPEX as well as grow non-fuel income as part as cost operating and impact to profitability
• Maintain optimal levels of fuel inventory to meet the fluctuating demand
For more information on How We Responded, please refer to Responding to Impact of COVID-19 on pages 44 to 45 and Driving Sustainability on page 223 of this
RESULTS OF MITIGATION ACTIONS
• Maintained balance sheet strength and overall financial position in 2020
• Sustained optimum inventory levels below 11.76 days
• Uninterrupted delivery of products to our customers in a safe, timely and reliable manner
• >2 million Setel® downloads, an increase of 83.0% as compared to preceding year
Strategic Priorities
• | Financial loss | • | Tarnished reputation |
• | Destruction in demand for key products | • | Imprisonment and/or fines |
• | Rapid change in customer behaviour | • | Decrease in stakeholders' (customers, suppliers, investors) |
• | Operations disruption | confidence |
Link to:
Capitals
RISK MOVEMENT:
DESCRIPTION
The need to ensure PDB complies to relevant regulatory requirements such as anti-money laundering, data protection as well as anti-bribery/corruption acts is essential where changing regulations could adversely impact the Group's competitive position and capacity to conduct business efficiently. The Company acknowledges changes in the regulatory environment, specifically on the newly introduced Corporate Liability Provisions under Section 17A of the MACC Act 2009 effective 1 June 2020, exposing the Company to criminal sanctions and civil suits.
PDB is exposed to Money Laundering/Counter Terrorism Financing, data breach and corruption risks which may adversely impact our reputation.
Link to:
Strategic Priorities
Capitals
8
REGULATORY RISK
IMPLICATIONMITIGATION STRATEGIES
• Establish Anti Money Laundering/Counter Financing of Terrorism Policy and Framework
• Establish Corporate Privacy Policy and Data Secrecy Manual to safeguard data privacy of our employees and third parties
• Adopts Third Party Risk Management controls and established a due diligence tool on Know Your Counterparty process
• Performed Corruption Risk Assessment as part of Adequate Procedures as a defense against corporate liability charge under Section 17A of MACC Act
• Adopts and practices the PETRONAS Code of Conduct and Business Ethics as well as PETRONAS Whistleblowing Policy
For more information on Internal Controls as well as Governance and Business Ethics, please refer to SORMIC on pages 182 to 193 and Driving Sustainability on pages 235 to 238 of this
RESULTS OF MITIGATION ACTIONS
• No breach of critical laws and regulations
OUR STRATEGY
Our strategy charts our path towards becoming a sustainable business in order to create value for our stakeholders. Responding to emerging market trends and a challenging business landscape, our strategies are rooted in four core drivers: (1) Market Leadership, (2) Safe, Reliable and Efficient, (3) Great Place to Work and (4) Digitally Enabled.
Our strategic objectives and initiatives take into account the operating environment, our material matters which address the organisation and stakeholders' needs and concerns, and management of business risks. Putting the customer's experience as our central purpose, we established a more robust approach for operational excellence, quality management, talent development, digital transformation and sustainable business practices. Based on these four Strategic Priorities, we aim to ensure continuous business growth, improve financial strength and move the Company to be more customer-centric.
2020 Strategic Priorities
Strategic Thrust/Objectives
2020 Key Initiatives
• Expand retail network
• Focused and targeted marketing campaigns
• Grow strategic alliances
• Secure new customers
• New product offerings
• Drive power brands
• Full compliance to HSE requirements
• Improve supply efficiency and reliability
• Improve operating discipline
• Instil PETRONAS Cultural Beliefs
• Organisational restructuring for greater clarity of roles and accountability
• Capability development
• WFH arrangement
• Install next generation hardware
• Systems modernisation
• Build data hub infrastructure
Market Leadership
Safe, Reliable and EfficientGreat Place to WorkDigitally Enabled
To become the market leader in every business segment whilst maximising value through customer-first mindset
To ensure all facets of our business and operations are executed in a manner that is safe, reliable and efficient
To create a healthy, positive and conducive working environment for our people, who are our greatest assets
To accelerate growth, future proof our business and disrupt the competitive business landscape
2020 Achievement
• >10 new stations in 2020
Link to: Capital
2021 Priorities
• Introduced Makan@Mesra
• Introduced Gula Aren series exclusively sold at Tealive in PETRONAS stations
• Premium fuel launched of PETRONAS Primax 97 with Pro-Race
• Growing our businesses with heightened corporate responsibility by balancing the Triple Bottom Lines i.e. 3Ps (People, Planet, and Profit)
• First LNG solution provider using road trucks for off-grid customers in Peninsular Malaysia
Material Matters
• Winning B2B and B2C through integrated marketing
• Superior products delivery
• New LPG cylinders sales channel through LPG@Sundry Shop
• Develop strategic partnerships
• Launched PRYSM, PETRONAS motorsport and lifestyle brand
• Grow non-fuel through MESRA and New Ventures
• Zero major HSE incident across terminals
Capital
• Sustained optimum inventory levels below 11.76 days despite the global pandemic
• Continuous improvement of timely product delivery by 2.2%
• Cost optimisation through OER2
Material Matters
• Maintained LPG Filling Plant OEE at optimum level of 90.9%
• HSE excellence through HSE Generative Culture
• 2:1 ratio of ready talents to PDB critical positions
Capital
• Sharpen employee competency
• 2.8 total training Man-days per employee
• Female Employees Composition:
• Business improvement and transformation
- Total Workforce: 32.0%*
Material Matters
- Leadership Team: 47.0%*
- Board of Directors: 30.0%*
• Development of PDB Human Capital Blueprint to embed Agile Enterprise transformation
• Conducive WFH arrangement
*PDB Group
• Setel® rolled out to >1,000 PETRONAS Stations nationwide with >2 million downloads
Capital
• Launched pay-in-store capability and the Deliver2Me function
• Modernisation of Outdoor Payment Terminal and Cloud-based Point-of-Sales system to >500 PETRONAS stations
Material Matters
• Continued execution of Digital Blueprint
KEY PERFORMANCE INDICATORS
Metrics
Unit
Objectives
Income generated from normal business operations.
To measure PDB's growth from normal business operations.
PAT is a primary measure of financial results and the organistation's sustainable business growth.
• To measure dividend payout in relation to number outstanding ordinary shares issued.
• To deliver sustainable value to our shareholders via dividend contribution.
To measure of profitability against capital investment.
2019
2020
How we Measure
2021 Priorities
RM30.3 bil
15,638 mlRM837.6 milRM18.7 bil
12,060 mlRM272.4 milBased on PDB Group Audited Financial Statements.
Based on Retail and Commercial segment sales volume.
Based on PDB Group Audited Financial Statements.
To maximise income generation from normal business operationTo maximise sales from normal business operations and to sustain market leadership in commercialPrudent spending on both development and operational cost to maximise shareholder's value
• 85.0 sen/share
• 104.0%
14.1%
• 38.0 sen/share
• 96.0%
4.7%
• Sum of declared dividends for every share outstanding ordinary shares issued.
• Total dividend payout to shareholders relative to Net Income of PDB Group.
PAT divided by Average Capital Employed.
PDB intends to maintain its current dividend policy of 50.0% of the company's PAT
To ensure optimal return from capital investment
KEY PERFORMANCE INDICATORS
Metrics
Unit
ObjectivesHEALTH, SAFETY AND ENVIRONMENT
Greenhouse Gas Emissions | '000 MT CO2e | Allows company to account for increases or decreases of |
emission over time. | ||
Spill to Environment above | Number | Allows company to account for increases or decreases of |
1 barrel (>159 L) | pollution over time. | |
LTI and LTIF | No of LTI per one | The figure represents the number of lost time injuries in a |
million man-hours | given period compared to the total number of hours worked | |
during that period. | ||
The figure calculated shows companies what happened in | ||
each timeframe so they can take steps to prevent similar | ||
incidents in the future. | ||
Fatalities | Number | Death resulting from a recordable injury or illness regardless |
of the time intervening between the injury/illness and death. | ||
Fatality Accident Rate | Recordable fatalities | The figure represents the number of fatalities in a given period |
per 100 million | compared to the total number of hours worked during that | |
man-hours | period. | |
Total Reportable case frequency | No of Total | The figure represents the number of recordable cases in a |
Reportable case per | given period compared to the one million man-hours. | |
one million man- | ||
hours | ||
ORGANISATIONAL CAPABILITY | ||
Ratio of Ready top talents to | Ratio | Ensure availability of the right talent to succeed critical |
critical positions | positions | |
Critical positions succession | % | |
planning | ||
Total Employees* | No of employees | To ensure smooth running of business operations |
Female Employees Composition | % | To support Diversity and Inclusivity in promoting gender |
• Total Workforce* | equality | |
• Leadership Team | ||
• Board of Directors | ||
* PDB Company only |
2019
2020
How we Measure
2021 Priorities
221.0
2
0
0
185.8
2
0.16 (1)
0
Quantities of GHG emissions from both Scope 1 (Direct) and Scope 2 (Indirect) Emissions Sources from operation.
Unplanned or uncontrolled release of liquid or solid associated with current operations from primary or secondary containment, into the environment.
An injury sustained by a worker that resulted in Fatality, Permanent Total Disability, Permanent Partial Disability and Lost Workday Case.
The higher this measurement, the greater the indication HSE management is lacking.
Rate of total number of recordable fatalities (staff, contractor and third party) from all incidents per one hundred million man-hours.
0
0
The higher this measurement, the greater the indication HSE management is lacking.
To conduct independent verificationTo aim for ZERO Spill to EnvironmentTo aim for ZERO LTI and LTIF
To aim for ZERO Fatality
0.98
0.32
Rate of total number of recordable cases per one million man-hours. Total Recordable Cases are the sum of fatalities and total injuries resulting in Permanent Total Disabilities, Permanent Partial Disabilities, Lost Workday Cases, Restricted Work Cases, and Medical Treatment Cases.
To aim for ZERO total reportable case frequency
5-YEAR GROUP FINANCIAL HIGHLIGHTS
OPERATING RESULTS (RM MILLION)
Revenue
Operating profit Profit before taxation Profit after taxation
KEY BALANCE SHEET DATA (RM MILLION)
Property, plant and equipment
Total assets
Total borrowings Total liabilities Share capital Shareholders' equity
SHARE INFORMATION Per share (sen)
Basic earnings Gross dividend
Share price as at financial year end (RM)
FINANCIAL RATIOS Return on revenue Return on equity Return on total assets Debt to equity ratio Dividend payout
* Includes special dividend of 22 sen per ordinary share ** Includes special dividend of 15 sen per ordinary share # Includes lease liabilities as part of total debts
5-YEAR GROUP FINANCIAL SUMMARY
* Restated following adoption of MFRS15
Revenue from Contracts with Customers ** Excluding discontinued operations and gain on disposal of subsidiaries
Revenue
(RM million)
18,710.9
2020
2019 2018 2017 2016
30,293.6
30,068.8
27,420.6*21,534.6
Profit after Taxation
(RM million)
272.4
2020
Profit before Taxation
(RM million)
386.4
2020
1,128.9
2019 2018 2017 2016
1,190.4
837.6
946.5
2019 2018 2017 2016
1,545.0
Equity attributable to Shareholders
(RM million)
5,643.7
2020
2019 2018 2017 2016
5,975.9
5,897.1
6,001.7
5,303.0
Total Assets
(RM million)
8,359.6
2020
2019 2018 2017 2016
9,996.3
9,170.8
9,748.2
9,364.9
Total Liabilities
(RM million)
2,684.0
2020
2019 2018 2017 2016
3,984.9
3,233.5
3,707.6
4,028.4
Earnings per share
(sen)
27.8
1,896.3
2020
155.0
83.5
2019 2018 2017 2016
95.1
SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION
Share Capital Reserves Non-Controlling Interests Non-Current Liabilities Trade and Other Payables Other Current Liabilities
SEGMENTAL ANALYSIS
GROUP QUARTERLY FINANCIAL PERFORMANCE
2020
In RM Million | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | FY2020 |
Revenue | 6,554 | 2,932 | 4,830 | 4,395 | 18,711 |
Operating (loss)/profit | (14) | 6 | 292 | 119 | 403 |
(Loss)/Profit before taxation | (18) | 1 | 288 | 115 | 386 |
(Loss)/Profit after taxation | (28) | 2 | 211 | 87 | 272 |
(Loss)/Earnings per share (sen) | (3.0) | 0.4 | 21.4 | 9.0 | 27.8 |
Dividend per share (sen) | 5.0 | 5.0 | 11.0 | 17.0 | 38.0 |
2019 | |||||
In RM Million | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | FY2019 |
Revenue | 7,086 | 7,606 | 7,807 | 7,795 | 30,294 |
Operating profit | 387 | 240 | 322 | 198 | 1,147 |
Profit before taxation | 383 | 238 | 318 | 190 | 1,129 |
Profit after taxation | 294 | 174 | 241 | 129 | 838 |
Earnings per share (sen) | 29.3 | 17.4 | 24.1 | 12.7 | 83.5 |
Dividend per share (sen) | 15.0 | 14.0 | 16.0 | 40.0* | 85.0* |
* Includes special dividend of 15.0 sen per ordinary share |
As at | Effective | Interest | As at | |
31 | Interest | Income/ | 31 | |
December | Rate | (Expenses) | December | |
(RM mil) | (%) | (RM mil) | (RM mil) | |
Interest earning assets | ||||
Cash and cash equivalents | 2,678.7 | 2.7 | 71.3 | 3,409.3 |
Fund investment | - | - | - | 51.0 |
Interest bearing liabilities | ||||
Islamic financing facilities | 9.9 | 2.8-4.3 | (0.8) | 29.8 |
Revolving credits | 9.5 | 2.8-2.9 | 0.0 | 5.5 |
Lease liabilities | 158.8 | 3.7-8.4 | (14.0) | 298.9 |
KEY INTEREST BEARING ASSETS AND LIABILITIES | |
2020 | 2019 |
Effective | Interest |
Interest | Income/ |
Rate | (Expenses) |
(%) | (RM mil) |
3.6 | 121.1 |
3.5 | 0.9 |
4.3-4.7 | (1.8) |
2.9 | (0.1) |
4.2-8.4 | (18.9) |
STATEMENT OF VALUE ADDED
Value added is defined as the value created by the activities of a business and its employees and in the case of PDB is determined as revenue less the cost of goods and services. The value added statement reports on the calculation of value added and its application among the stakeholders in the Group. This statement shows the total wealth created and how it was distributed, taking into account the amounts retained and reinvested in the Group for future growth.
2020 | 2019 | |
Group | RM'000 | RM'000 |
Revenue | 18,710,947 | 30,293,571 |
Less: Purchase of goods and services | (17,900,333) | (28,787,620) |
Value added | 810,614 | 1,505,951 |
Other income | 363,791 | 439,527 |
Financing costs | (16,035) | (21,812) |
Share of net (loss)/profit of associates and joint ventures | (78) | 3,889 |
Value Created | 1,158,292 | 1,927,555 |
DISTRIBUTION OF VALUE ADDED
Distributed to:
Employees - employment costs Shareholders - dividends Government - taxation
Retained for reinvestment and future growth:
Depreciation and amortisation
Retained profits
Value Distribution
2020 RM'000
2019 RM'000
Employees - employment costs Shareholders - dividends Government - taxation
Retained for reinvestment and future growth
FINANCIAL CALENDAR
2020
25 February 2020
Announcement of the unaudited consolidated results for the 4th quarter ended 31 December 2019
27 February 2020
Announcement of the audited financial statements for the financial year ended 31 December 2019
26 March 2020
Date of payment of the interim and special dividend for the 4th quarter ended 31 December 2019
31 March 2020
Date of Notice of 38th Annual General Meeting and date of issuance of 2019 Integrated Report
18 May 2020
Announcement of the unaudited consolidated results for the 1st quarter ended 31 March 2020
10 June 2020
38th Annual General Meeting
17 June 2020
Date of payment of the interim dividend for the 1st quarter ended 31 March 2020
25 August 2020
Announcement of the unaudited consolidated results for the 2nd quarter ended 30 June 2020
24 September 2020
Date of payment of the interim dividend for the 2nd quarter ended 30 June 2020
17 November 2020
Announcement of the unaudited consolidated results for the 3rd quarter ended 30 September 2020
INVESTOR RELATIONS
WE VALUE OUR SHAREHOLDERS AND PLACE UTMOST IMPORTANCE IN ESTABLISHING AND CONTINUING A STRONG RELATIONSHIP WITH THEM. WE SEEK TO UPHOLD THEIR TRUST IN PDB BY MAINTAINING HIGH STANDARDS OF TRANSPARENCY AND REGULAR COMMUNICATION TO INFORM THEM OF
PDB INVESTOR RELATIONS POLICY AND GUIDELINES
All of our Investor Relations programmes are guided by PDB's Investor Relations Policy and Guidelines, developed in 2011 and has been amended and approved by PDB's Board of Directors on 20 August 2018.
For more information on PDB's Investor Relations Policy and Guidelines, please refer to PDB's corporate website atwww.mymesra.com.my
INVESTOR RELATIONS COMMUNICATION AND ENGAGEMENT
MATERIAL DEVELOPMENT IN THE COMPANY. CHANNELS
OUR INVESTOR RELATIONS ACTIVITIES AND ENGAGEMENT PROGRAMMES ARE DESIGNED TO PROVIDE FAIR AND BALANCED INFORMATION REGARDING THE COMPANY AND FOCUSED AROUND MAINTAINING CONFIDENCE WITHIN THE INVESTMENT COMMUNITIES, LOCALLY AND INTERNATIONALLY.
Communication lines with local and foreign investors were kept firmly open throughout the year, except during blackout periods. With physical interaction limited during the COVID-19 pandemic, engagements with investors/analysts are conducted virtually in accordance to PDB HSE's COVID-19 SOP either via one-on-one meetings, teleconferences or roadshows and corporate conferences. IR engagements are fronted by only authorised spokesperson to ensure credibility and effective communication with PDB's shareholders. The MD/CEO and CFO lead the investor relations activities with support from the Investor Relations team.
QUARTERLY FINANCIAL RESULT ANNOUNCEMENTS AND ANALYST BRIEFINGS
We consistently issue our quarterly financial result announcements to Bursa Malaysia in accordance with MMLR in a timely manner. Subsequently, we conduct analyst briefings for investment communities to allow further clarification and interaction between the analysts and the management. The sessions were chaired by the MD/CEO together with CFO.
In 2020, we conducted one physical Analyst Briefing for Quarter 4, 2019 results in February prior to the MCO implementation by the government and three virtual Analyst Briefings on the subsequent quarters. Following the Briefings, presentation packs on PDB's business and financial performances, the quarterly announcements to Bursa Malaysia as well as press releases were published on PDB's corporate website. In 2020, we have engaged 137 analysts.
For more information on Quarterly Financial Result Announcements and Analyst Briefings, please refer to PDB's corporate website atwww.mymesra.com.my
Purpose:
To keep the Investment Communities updated on PDB's quarterly performance and outlook for balanced understanding as well as to provide a basis for fair valuation.
CORPORATE CONFERENCE
During the year, PDB participated in two Corporate Conferences and engaged with 42 analysts. Our participation in Corporate Conferences were based on invitation by the financial institutions.
Purpose:
To provide an update on PDB's financial performance and business outlook to current and potential investors, analysts and fund managers locally and internationally and to provide a basis for fair valuation.
INVESTOR RELATIONS
ANNUAL GENERAL MEETING
PDB's 38th AGM was held virtually on 10 June 2020 in accordance to the Securities Commission Guideline on Virtual Meetings by Listed Issuers dated 18 April 2020 ("Guidance Note"). PDB strictly followed the Guidance Note in conducting the virtual AGM whereby there were only a maximum of eight essential individuals including the Chairman, one director, MD/CEO, CFO, Company Secretary, the Scrutineer and audio/visual support representatives. All resolutions tabled at the AGM were duly passed and voting was performed via electronic polling. Independent scrutineers were engaged to validate the voting on each proposal presented to 259 shareholders and proxies who attended the meeting. The minutes of PDB's AGM is available on PDB's corporate website within 60 days upon AGM.
For more information on AGM, please refer to Corporate Governance Overview Statement on pages 132 to 165 of this
Purpose:
To present the Company's business and financial performances; the strategic focus areas moving forward and to seek shareholders' approval on the proposed resolutions.
INVESTOR RELATIONS ACTIVITIES
ANALYST BRIEFING IN 2020
Note:
PHYSICAL
Q4 ANNOUNCEMENT DATE
2019
25 February 2020
BRIEFING DATE 26 February 2020
VIRTUAL
Q1 ANNOUNCEMENT DATE 2020
18 May 2020
BRIEFING DATE 19 May 2020
Q2 ANNOUNCEMENT DATE
2020
25 August 2020
BRIEFING DATE 26 August 2020
Q3 ANNOUNCEMENT DATE
2020
17 November 2020
BRIEFING DATE 18 November 2020
The 2021 Analyst Briefing dates will be available on PDB's corporate website atwww.mymesra.com.myone week prior to the Analyst Briefing
CORPORATE CONFERENCE
SHARE PRICE PERFORMANCE
Date | Date |
7 January 2020 | 2 September 2020 |
Event | Event |
CGS-CIMB 12th | RHB Virtual Conference: |
Annual Malaysia | Navigating Oil Price |
Corporate Day | Volatility |
Location | Location |
MALAYSIA | VIRTUAL |
PDB's share price reached its peak of RM23.96 on 17 January 2020 and dipping at the lowest point to RM17.08 on 26 October 2020.
INVESTOR RELATIONS
PDB SHARE PRICE VS FBM KLCI IN 2020
Opening: RM26.00 Closing: RM23.10
2019
85.0 senRM22.95 bil
112.9 mil
Highest: RM28.48 Lowest: RM21.20
(include special dividend of 15.0 sen)
9.37%* as at 31 July 2019
*highest during the year
SHAREHOLDINGS
As at 31 December 2020, around 92.0% of our shareholders are Malaysians, comprising nominees, government agencies/institutions, banks/finance companies, corporations and other types of shareholders. Our parent company, PETRONAS is our major shareholder, holding close to 64.0% equity in PDB. In 2020, our foreign shareholding reached its highest at 9.08% in January.
As at 31 December 2020
Source: Symphony and Bloomberg
ANALYST RECOMMENDATIONS
Overall recommendation on PDB's share price in 2020 by the research houses:
Note:
1. The recommendations were based on 2020 results announcement.
2. Two research houses did not produce any report for 2020 results announcement.
IR CONTACT, WEBSITE AND FEEDBACK
WEBSITE
All Investor Relations engagements and activities are published on PDB's corporate website atwww.mymesra.com.my. This website provides information, among others on PDB's IR Policy and Guidelines, announcements, financial results, quarterly briefing materials, minutes of AGM, press releases and disclosures to Bursa Malaysia
IR CONTACT AND FEEDBACK
The Investment Communities may forward any enquiries and feedback related to Investor Relations matters to the following representatives:
Nur Asyirin Ibrahim
Head, Investor Relations
Email:nurasyirin@petronas.com.my
Adam Iskandar Ahmad Zahar Executive, Investor Relations
Email:adamiskandar.ahmadz@petronas.com.my
BUSINESS REVIEW
OUR KEY OPERATIONS
"Despite the global pandemic challenges, we are dedicated tocontinuing our daily operations in a safe, timely and reliable manner. We ensure that we are able to provide additional value to our customers and stakeholders through strengthening our key operations i.e Operational Discipline and digitalisation that are vital for highly efficient and productive operations"
WHO WE ARE AND WHAT WE DO
NORMAH BINTI BASRI
Head,
Supply and Distribution Division
• The Supply and Distribution Division is in charge of overseeing a constant end-to-end supply network to send products to our consumers in the most effective manner. Our vital roles consists of product sourcing, product distribution, infrastructure planning, terminal operations, asset management and product delivery.
• SDD aids our lines of business through various distribution channels, crucial, proactive planning and a broad range of supply network across 38 terminals in Malaysia in assuring the PDB's license to operate. We continue to strive by focusing to instill generative HSSE culture, operational excellence and in compliance with regulatory at all times.
KEY FOCUS AREAS
• We continue to improve our services through our outstanding efforts of cost optimisation and being the solution provider with a strong network that meet our customers' expectation.
• We continue to focus on cost optimisation, supply reliability, customer satisfaction, HSE assurance and operational excellence as factors ensuring sustainable competitive advantage towards making people's life simpler and better.
CHALLENGES
Safe
Challenges
a. Risk of COVID-19 infection amongst staff, dealers, contractors and hauliers
b. Exposure to HSE Risk whereby our products are highly flammable and transportation hazard
Our Response
• Stringent SOP during COVID-19 pandemic at all terminals particularly in red area and frequent swab test for high risk category such as Rakan Khidmat Penghantar
• Continuous compliance to HSE standards in all our operations
• Heighten safety and compliance culture amongst staff, dealers, contractors and hauliers
Reliable
Challenges
Ensuring uninterrupted product supply across the value chain and consistent delivery of quality product
Our Response
• Optimisation of fleet schedule to achieve timely delivery and to avoid supply disruption
• Maintain high reliability index of OEE and improvement in On-Time Performance
Efficient
Challenges
Our Response
a. Planning of product supplies due to uncertain demand• Optimise term charter vessel and road tankers to achieve the
profile during various stages of MCO b. Increasing operating and logistic cost impacting profitability
most efficient cost
PERFORMANCE REVIEW
Strategic Priorities
SRE
SAFE, RELIABLE AND EFFICIENT
Accreditation for Excellent Occupational Health and Safety Performance
Key Initiative
• Participation in annual audit by MSOSH
Results
• Awarded 8 Gold Merit and 5 Gold awards by the MSOSH
• Zero major HSE incident across terminals
Safe
Professional Rakan Khidmat Penghantar towards OER2
Key Initiative
• Enforcement On Board Camera Reviewer Competency Program for the hauliers
Results
• 100% completion of Professional Haulier On Board Camera reviewer at all regions
BUSINESS REVIEW
Our Key Operations
PERFORMANCE REVIEW
Strategic Priorities
SRE
SAFE, RELIABLE AND EFFICIENT
Reliable
Margin Improvement
Ensure reliable and timely product delivery
Key Initiative
• Integrated Inventory Management to minimise exposure to price volatility
• Rationalisation of primary cost via matching the fleet size to meet business requirements
• Manage underutilisation of Road Tankers by diverting from low volume product such as Jet A-1 to commercial products
Results
• Sustained optimum inventory levels below 11.76 days despite the global pandemic
• Continuous improvement of timely product delivery by 2.2%
Strategic Priorities
SRE
SAFE, RELIABLE AND EFFICIENT
Efficient
Improvement of Operational Discipline
Cost Optimisation and Value Creation
Key Initiative
• Operational Excellence roll out through OER2 Initial Implementation Assessment
• Optimise fleet utilisation through improved diversion from low volume product to carry other load size and effective route planning
• Low volume in aviation negated through outsource of manpower and vehicle deployment rationalisation initiative
Results
• 100% Peninsular Malaysia terminals have passed OER2 Initial Implementation Assessment and proceed for final assessment
• Cost Optimisation of RM5 million from outsource of manpower and vehicle deployment rationalisation at Aviation
GPW GREAT PLACE TO WORK
DIGITALLY ENABLED
For more information on Great Place to Work, please refer to Driving Sustainability on pages 225 to 234 of this
For more information on Digitally Enabled, please refer pages 107 to 111 of this
OUTLOOK & PROSPECTS | Moving forward in the next normal, Supply and Distribution will continue to create seamless and frictionless customer experience by focusing on continuous improvement and implementing OER2 at our terminals to ensure we deliver sustainable competitive advantage for the company. |
"It been a challenging year for Retail Business. The effects of the COVID-19 outbreak and the MCO impacted our business and challenged us in unprecedented ways. Nevertheless, we continued to strengthen our brand presence and delivered superior customer experiences. We introduced PETRONAS Primax 97 with Pro-Race which provided our customers with an exceptional fuel. To ensure customer safety at all PETRONAS stations, we adhered to all SOP guidelines. Putting our customers first, we continued to provide a seamless and frictionless experience by leveraging digital technology. We will continue to innovate the market and future-proof our business by offering products of unparalleled quality, high levels of service delivery and establishing differentiating factors to appeal to our customers."
WHO WE ARE AND WHAT WE DO
Our Retail Business offers FUEL AND NON-FUEL PRODUCTS AND SERVICES to consumers through our network of more than 1,000 PETRONAS stations and 800 Kedai Mesra nationwide
• FUEL segment comprises premium products, developed in partnership with the Mercedes-AMG PETRONAS Formula OneTM team which include PETRONAS Primax 97 with Pro-Race, PETRONAS Primax 95 with Pro- Drive, PETRONAS Dynamic Diesel (B10), PETRONAS Dynamic Diesel (B20) and PETRONAS Dynamic Diesel Euro 5 with Pro-Drive.
KEY FOCUS AREAS
KHALIL JAFFRIMUHAMMAD MURI
Head,
Retail Business
Division
• NON-FUEL segment comprises on-the-go consumer products and services which include our partnerships with Quick Service Restaurants, food solutions including our own Makan@Mesra, banking facilities, hypermarts, terminal services, courier services, car wash and other convenience offerings through the KEDAI MESRA. In supporting the Retail business, we reward our loyal customers through the PETRONAS Mesra Loyalty Programme.
• All PETRONAS stations are operated by RAKAN NIAGA, who are appointed through a stringent selection process and provided with continuous training. Retail Business manages PETRONAS stations via two categories of dealerships - COMPANY-OWNED, DEALER-OPERATED and DEALER- OWNED, DEALER-OPERATED.
• Fuel branding - New premium fuel PETRONAS Primax 97 with Pro-Race
• Marketing programme - Use of integrated and targeted marketing programmes to engage customers at all levels
• Non-fuel - Makan@Mesra and Ready-to-Eat, Ready-to-Drink and own labels
BUSINESS REVIEW
Retail
KEY HIGHLIGHTS
>10 new stations in 2020
Launched ready-to-eat meals and other food offers under new Makan@Mesra concept
Expansion of Mesra Bites SKU range
Introduced Gula Aren series exclusively sold at Tealive in PETRONAS stationsLaunched new PETRONAS Primax 97 with Pro-Race premium fuel
Digitalised Mesra Redemption portal for mobile app
(via Setel®) and web
CHALLENGES
Challenges
Intense competition in a mature marketDisruption of marketing programmes due to restriction on movement
Deferment of project timeline due to various stages of MCO
Lower demand during COVID-19 pandemic
Our Response
Launched a superior quality fuel, the new PETRONAS Primax 97 with Pro-Race and new and differentiated food solutions; Makan@ Mesra
Leverage on new and innovative digital platforms to deepen customer engagements and communications
Project prioritisation for HSE compliance and value
Focus on safety and wellbeing of customers via Setel® (contactless payment). Engaged customers using below-the-line and digital channels
PERFORMANCE REVIEW
Strategic Priorities
ML
MARKET LEADERSHIP
Elevate delivery of customer experience
Enhance network quality
Key Initiative
• Launched new PETRONAS Primax 97 with Pro-Race
• Increased the adoption of digital marketing
Results
• Increased PETRONAS Primax 97 with Pro-Race sales by >10.0% over the corresponding period
• Enabled new and unique customer experiences for Mesra members
Key Initiative
• Grow PETRONAS stations network at selected locations
Results
• Operationalised >10 stations
BUSINESS REVIEW
Retail
Strategic Priorities
PERFORMANCE REVIEW
ML
MARKET LEADERSHIP
Attract traffic to the stations
Key Initiative
• Ensure our customers are engaged and feel safe at our stations
Results
• Intensified adoption of digital engagement and marketing across the customer lifecycle
• Setel®'s seamless and frictionless customer experience (an innovative platform that provides every motorists a seamless experience for retail on-the-go) rolled-out to >1,000 stations nationwide
Key Initiative
• Collaborate with Rakan Niaga to conduct active customer engagements and promotion
• Collaborate with Rakan Niaga to conduct local community programmes at stations and surrounding communities such as food bank and food giveaways
Results
• Enhanced support of local products and entrepreneurs with the launch of Love Local
Introduce new Kedai Mesra concept
Shift reliance from sunset categories
Key Initiative
• Rolled-out new Kedai Mesra concept
Results
Completed new pilot Kedai Mesra concept stores with the following highlights:
• New and improved interior design exude a clean contemporary theme, fresh ambience with a hint of nature and heritage
• Improve visibility of the convenience store from the forecourt and uplift Kedai Mesra brand as a whole
• A bright environment with consumer focused look-and-feel, and focused customer offers especially in food categories
Key Initiative
• Introduced Makan@Mesra
Results
• Successfully launched Makan@Mesra new concept
• Introduced >300 SKUs under the concept which consist Ready-to-Eat and Ready-to-Drink offerings
Key Initiative
• Expansion of Mesra own label brand
Results
• Expansion of Mesra Bites SKU ranges based on encouraging performance in previous phases
PERFORMANCE REVIEW
Strategic Priorities
ML
MARKET LEADERSHIP
Re-imagining partners model
Strengthen the supply chain to support business growth
Key Initiative
• Enhance collaboration with Tealive
Results
• >100 Tealive X PETRONAS kiosks in operation
• Introduction of Gula Aren series exclusively sold at Tealive in PETRONAS Stations
Key Initiative
• Ensure smooth operations for product supply at Kedai Mesra and Mini Mesra
Results
• Successfully centralised distribution for Kedai Mesra and Mini Mesra in East Malaysia
SAFE, RELIABLE AND EFFICIENT
For more information on Safe, Reliable and Efficient, please refer to Our Key Operations on pages 86 to 88 of this
GPW GREAT PLACE TO WORK
For more information on Great Place to Work, please refer to Driving Sustainability on pages 225 to 234 of this
DIGITALLY ENABLED
For more information on Digitally Enabled, please refer pages 107 to 111 of this
OUTLOOK & PROSPECTS | As public transportation, ride hailing services and energy efficient vehicles gain a stronger foothold in Malaysia, demand for conventional fuels may be affected. We are however prepared for these market disruptors as we continue to strengthen our product quality, branding and enhance customers experience at PETRONAS stations with reliable facilities, superior fuel products and attractive lifestyle-based offerings all delivered at a consistently high level of service. These products and services will be supported by our customer loyalty programme as well as a growing e-commerce and digital presence. |
BUSINESS REVIEW
"2020 market environment was brutally harsh. The impact of the COVID-19 pandemic and imposition of the MCO resulted in unprecedented lower demand for petroleum products, coupled with a steep drop in global oil prices. Despite these setbacks, we persevered and bounced back stronglyby effectively executing our recovery and rebound strategies to capitalise on market regrowth."
Head, Commercial Business Division
WHO WE ARE AND WHAT WE DO
• Commercial Business drives the sales and marketing of bulk petroleum products to various economic sectors such as Agriculture, Mining and Quarrying, Manufacturing, Construction, Services, Aviation and Bunker.
KEY FOCUS AREAS
RAMZULHAKIM RAMLI
• Commercial business products include Diesel, Jet A-1, Fuel Oil, LNG, Bitumen, Kerosene, Gasoline, Petroleum Coke, Sulphur and Methanol.
• Commercial Business is entrusted to deliver value to the customers by leveraging on its strength of having extensive nationwide network which includes fuel storage terminals and transportation.
• Provide comprehensive offerings to improve value proposition for customers coupled with unrivalled service and solutions.
• Drive sales to capture the demand recovery wave post-MCO.
• Focus on effective risk management and cost efficiency whilst maintaining high standards of customer service.
Superior Performance
Despite the challenging economic environment, Commercial Business maintained a strong performance across its volume and financial indicators on the back of effective execution of its recovery and rebound strategies.
KEY HIGHLIGHTS Customer Centricity Continuously engaged with customers and provided unrivalled customer experience, which enabled Commercial Business to grow and defend its customer base by securing new contracts and renewing existing ones.
Strategic Partnership Strategic partnership with customers to push boundaries and explore new business opportunities to unlock value potential. Enabled sustainability agenda with our customers by switching from conventional fuels to LNG.
CHALLENGES
Challenges
Eroding demand due to COVID-19 pandemic coupled with imposition of MCO and steep drop in global oil prices that resulted in MOPS backwardation which had adversely affected Commercial Business performance
Our Response
a. Driving sales to capitalise on post MCO demand recovery by pushing volume at high margin sectors and pursuing higher share of wallet from common customers
b. Secured new customers and renewed existing contracts to expand our customer and volume base
Intensifying competition at the back of demand erosion which resulted to excess product in the market
a. Providing comprehensive packaged offerings to improve value proposition for customers
b. Effective channel management to strengthen market position, which enabled Commercial Business to navigate through the challenging market environment
BUSINESS REVIEW
Commercial
Strategic Priorities
PERFORMANCE REVIEW
ML
MARKET LEADERSHIP
Customer centricity
Partnership and Sustainability
Key Initiative
• Elevate customer experience by providing unrivalled level of service and solutions
• Expanding customer base by securing new customers and renewing existing contracts
Results
• Secured >200 new contracts
• Strengthened market leadership
SAFE, RELIABLE AND EFFICIENT
For more information on Safe, Reliable and Efficient, please refer to Our Key Operations on pages 86 to 88 of this
GPW GREAT PLACE TO WORK
For more information on Great Place to Work, please refer to Driving Sustainability on pages 225 to 234 of this
DIGITALLY ENABLED
For more information on Digitally Enabled, please refer pages 107 to 111 of this
OUTLOOK & PROSPECTS | The Commercial Business remains affected by the slower recovery of certain economic sectors due to the continued MCO going into 2021. Additionally, we face increased competition as a result of excess product in the market. We continue to drive commercial business strategies through our focus on value creation, partnership and sustainability. Commercial Business will continue moving forward with our sustainability agenda by leading the change to cleaner fuels in the industry. |
"In dealing with an unprecedented and challenging business environment, LPG Business has remained agile and resilient. With this perseverance and focus, we stormed through aggressive competition while always supporting our channel members. Through this journey, we have solidified our position as the market leader; thus moving us towards a sustainable and enriching future together."
WHO WE ARE AND WHAT WE DO
PRAMELA VALLINAYAGAN Head,
LPG Business Division
LPG Business is the industry leader as well as Malaysia's No.1 retailer and marketer of liquefied petroleum gas.
With the nation's widest LPG supply and distribution network of eight terminals and bottling facilities, we are supported by LPG Channel Members consisting of premier dealers, dealers and bulk dealers in delivering our quality products to the masses.
KEY FOCUS AREAS
Our key focus area for Household segment is fortifying market leadership and driving growth for Commercial segment.
Overall, our main priority is to remain customer-centric as we aspire to continue creating a seamless and frictionless customer experience whilst sustaining an agile and resilient business in a challenging environment.
BUSINESS REVIEW
LPG
KEY HIGHLIGHTS
Fortified market leadership in challenging business environment
Embarked into new sales channel through LPG@Sundry Shop
Secured >40 new commercial customers despite aggressive competition
Continuation of sales channel expansion through LPG@PS
CHALLENGES
Challenges
Market downturn due to COVID-19 pandemicIntense market competition
Our Response
• Tailored business operations in accordance to the market behaviour
• Improved operational efficiency through cost optimisation
• Initiated new sales channel for competitive edge
• Provided assistance to channel members such as credit facilities to cushion financial constraint
• Offered competitive pricing and attractive sales package
• Maximised value and competitive edge through superior customer service as well as product quality
Create Sustain market leadership and profitabilityInnovate Capitalise on technology and innovation to improve on customers experience
Network
Serving customers through extensive network
Reliability
Safe and reliable products to consumers
Empower
Develop local economies by contributing to the success of dealers' businesses
Skilled
Develop high performing and skilled workforce
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Disclaimer
Petronas Dagangan Bhd published this content on 25 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 March 2021 09:05:01 UTC.
