The financial year ending on March 31, 2008 was yet another highly challenging year for the Petronas Group as it continues to strive to generate value amidst an increasingly volatile and uncertain global oil and gas industry environment beleaguered with escalating cost and an acute shortage of experienced personnel as well as equipment.
In short, the year saw oil and gas companies globally continuing to operate in a highly challenging environment where escalating costs have eclipsed gains from high prices. More significantly, the combined effects of high prices and high costs have had a more negative than positive impact on the industry and the global economy, particularly for developing economies.
Against this scenario, the Petronas Group recorded revenue of RM223.1 billion, an increase of 21.2%, primarily due to higher prices and higher sales volume. The Group successfully contained the impact of high costs and posted a 25.2% increase in profit before tax from RM76.3 billion to RM95.5 billion. Profit after tax and minority interests increased by 31.5% from RM46.4 billion to RM61.0 billion. Apart from the Group's ability to contain costs, this achievement was also largely due to the improved operational efficiency and higher plant reliability achieved across the Group's businesses.
The higher profit has enabled Petronas to provide higher payment to governments. For the year, Petronas Group paid out RM67.6 billion to governments, bringing the Group's total payments to governments to RM403.3 billion since its incorporation in 1974.
Of the RM67.6 billion payment for the year, RM62.8 billion was paid to the Federal Government comprising RM30 billion dividend which includes a RM6 billion special dividend, RM20.6 billion in the form of petroleum income tax, RM5.4 billion in corporate income tax, RM2.1 billion in export duties and RM4.7 billion of royalty payment. A total of RM4.8 billion was paid as royalty payments to the state governments of Terengganu, Sarawak and Sabah.
Petronas Group's payment to the Federal Government for the year represents 44% of the Federal Government's revenue.
The RM67.6 billion total payment to governments for the year represents 63.1% of the Petronas Group profits for the same period. Petronas Group retained only 29.2% of its profits during the year for reinvestments and the balance 7.7% was used to pay foreign taxes and minority interests. The reinvestment is necessary to ensure the Group's sustainable operations and growth in order to be able to continue to generate value for its stakeholders.
Higher prices during the year also resulted in Petronas incurring a higher subsidy to the nation's gas sector. Petronas' subsidy to the gas sector rose to RM19.7 billion, up by 26.2% from RM15.6 billion previously. This brought the cumulative gas subsidy to RM77.9 billion since 1997.
Gas subsidy to the power sector grew to RM13.8 billion, an increase of 17.9%, of which RM8.1 billion or 58.7% went to the Independent Power Producers. The higher prices have also driven the non-power sector to switch more of their fuel source to subsidized gas, resulting in a 51.3% increase in subsidy to the non-power sector to RM5.9 billion.
The year saw the Group's capital expenditure increase by 33.3% to RM37.6 billion, largely as a result of the escalation in cost. Of this, RM20 billion was spent in Malaysia, an increase of 36% compared to RM14.7 billion the year before. About 55% of the Group's total capital expenditure was spent in the Exploration and Production sector.
The Group's balance sheet continued to strengthen with total assets rising by 15.2% to RM339.3 billion while shareholder's funds grew to RM201 billion, an increase of 17.6%.
Return on Total Assets rose to 28.1% compared to 25.9% in the previous year, while Return on Average Capital Employed remained strong at 45.5%.
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