Refocused strategy helps Pilipinas Shell net P3.9B income end of 2021
May 06, 2022
Pilipinas Shell Petroleum Corporation’s refocused and reset strategy, in alignment with the Securities and Exchange Commission’s (SEC) approval of the organization’s equity restructuring application, has resulted in a net income of P3.9 billion at the end of the fiscal year 2021.
The company is on track toward a more sustainable and profitable future through its aggressive cash generation, prudent cash management, disciplined capital allocation and expansion, and the development of cleaner energy solutions that can generate robust returns for Shell’s shareholders.
The stronger net earnings performance has led to a positive Cash Flow From Operations (CFFO) before a working capital of P13.8 billion while the net CFFO stands at P1.1 billion. These demonstrate the company’s strong financial resilience throughout last year’s challenging business environment, sustaining efforts made to recover from its P16.2 billion loss in 2020.
“In 2021, which was a very remarkable year, we took concrete steps towards recovery and growth in line with our reset and refocused strategy,” says Lorelie Quiambao-Osial, the energy company’s President and Chief Executive Officer. “We made choices to pursue superior value, built upon a highly competitive portfolio of assets attuned to the future. From strengthening the business to advancing our social programs, we were able to weather the storms and adapt to the fast-paced changes of our times. We continue to power progress and make the Filipino’s journeys better through our services and solutions.”
Marketing for growth
The positive net earnings performance can also be attributed to the value maximization initiatives of the company’s businesses which delivered high growth through the market penetration of its high-premium fuel products. The respective volumes of Shell’s lubricant business and bitumen sales increased by 30% and 12% compared to 2020 figures. The company retained its status as the preferred fuel provider for B2B customers in power, construction, and other sectors that are integral to national economic growth.
Current and future marketing plans intended to bring growth include building structural additions over the next three years in Shell’s three medium-range-capable import terminals which are located in Batangas, Cagayan de Oro, and Subic.
A robust cash governance framework, with strong accountabilities across all business units and operational functions, has kept Shell’s collections and overdue receivables at healthy levels. Supporting this is a two-pronged approach that enables continued access to bridging funds: strong time-tested relationships with partner banks, as well as explorations in new collection gateways and digital payment options considered more convenient by a growing tech-savvy millennial consumer base.
Cash preservation was a focus in all initiatives and campaigns throughout 2021, in consideration of that year’s instability. This fiscal prudence kept the required check and balance as selling, general, and administrative operations were 12% and 6% higher compared to 2020 and 2019 respectively. This increase can be traced to the following reasons: residual operating costs of the import terminal facility in Tabangao, additional repairs to sites and other related structures affected by super-storm Odette, resumption of the employee discretionary bonus based on 2021 performance, and advertising and promotional activities in line with demand recovery.
Cost savings and reduction were brought about by supply chain enhancements that drove efficiency and competitiveness. The end-to-end optimization and collaboration in Tabangao resulted in Php0.9 billion cost savings for the company.
Shell’s refocused strategy also directed financial resources to more sustainable higher-yielding projects. Its investments continued in line with its P3 billion to P4 billion per annum CAPEX plan. At the same time, it delivered an 18% Return on Average Capital Employed (ROACE) which leads the industry and is higher than pre-pandemic levels.
Fuel and non-fuel products
Financial evaluation has also shown that economic prospects can improve by building fewer than the initially targeted 60 mobility stations nationwide, while ensuring these are still strategically located and offer Shell’s full range of fuel and non-fuel products. Shell currently has 43 new mobility stations, with 26 among the bigger company-owned sites located in key cities. One milestone is the launching of the first Site of the Future in Cavite, a modern, customer-centric, and sustainability-focused station built from a blueprint that is now being used globally in the Shell group.
Shell’s aggressive investments are also present in the expansion of its non-fuel retail products, ending the year with 187 Shell Select, 75 Deli2Go, 225 Select Express, and 455 Shell Helix Oil Service Centers.
The joint impact of both fuel and NFR products on Shell’s consumer base is evident in the 1-million-strong membership of its Shell GO+ app, reached within a mere first year of its launch.
Sustainability and the development of renewable energies remain central to the core of Shell’s vision. Initiatives in this area include the installation of solar panel fixtures on its 100th site, use of carbon emission-reducing eco-bricks and BitumenFreshAir as building materials for Shell stations, and installation of LED lights and inverters, green walls, and rainwater recycling systems in its stores.
Sustainability and the future
Both Shell’s Bitumen depot in Villanueva and its Tabangao import terminal have installed solar panels in their structures to reduce their energy consumption.
“Our agile and value-oriented approach complement the robust strategy we have in place,” says Quiambao-Osial. “Overall, we have made considerable strides in realizing our next five-year growth ambitions, even in the face of continued uncertainties and volatilities. “We will maintain the discipline to ensure the effective and efficient deployment of our capital while seeking to reward our shareholders and delivering on our aspiration to become a compelling, world-class investment case. As the world shifts to the next normal, we are excited to grow and thrive in the energy transition, deliver sustainable solutions, and power progress for the Filipinos.”