Phoenix Petroleum Company

Cash flow Analysis

The net operating cash flow of the company remained relatively consistent with previous years
despite the net loss from 2020 operations. Upon inspecting the cash flow statement, we
determined that there are huge decreases in the inventory per year, driving the net operating
cash flows up by PHP26.2 billion in 2020, PHP24.5 billion in 2019, and PHP26.8 billion in 2018.
Included in these are trust receipts 1 availed by the company in the amounts of PHP18.6 billion
in 2020, PHP25.3 billion in 2019, and PHP25.4 billion in 2018. We believe that trust receipts,
being bank borrowings, should be reclassified as financing rather than operating activities. This
would also affect their free cash flow, which can be used to pay dividends, expand its growth,
and reduce its debts. Additionally, their cash ratio has also decreased the past few years, from
0.23 in 2019 to .15 in 2020. This indicates decreasing capability of the company to pay its short-
term obligations without having to liquidate its assets. In 2021 the company has resorted to
selling its assets to manage its debt2.
Income Statement Analysis
The overall revenue of the company declined by 20% in 2020, from PHP97.8 billion in 2019 to
PHP78.2 billion in 2020. According to their annual report, there were 1,018 million incremental
sales volume from the comparative years 2020 and 2019, however, this was offset by lower fuel
prices which dropped from PHP20.69 per liter in 2019 to PHP13.19 in 2020. Total net income
(loss) before tax also deteriorated from 2018-2019 by 36% and from 2019-2020 by 109%,
resulting to a net loss (before tax) in 2020.

Comparable discussion on Material Changes in Results of Operations for the Year Ended
December 31, 2020 vs. December 31, 2019 (as re-stated).

The Group’s Revenues during the year 2020 declined 20% to Php 78.300 billion mainly due to
lower fuel prices. The average peso per liter price of petroleum products was 36% lower in 2020
on the back of the 35.5% drop in Dubai crude average to USD 42.24 per barrel, as well as the
4.2% appreciation of the peso to Php 49.64:USD 1. Volume, meanwhile, was up by 31.6% driven
by the volume sold by its foreign-based subsidiaries, PNX Singapore and PNX Vietnam, which
partly offset the 42% decline in domestic operations as the pandemic slowed down the local
economy. Cost of Sales and Services decreased by 17.9% to Php 71.252 billion in 2020 amidst

1
Trust receipts are short term financing arrangements wherein the bank pays for the goods and acquires
ownership but delivers it to the buyer or business for its own operations. The buyer will then pay the bank from
the sales proceeds once the goods are sold.
2
https://www.philstar.com/business/2021/03/23/2086439/after-2go-dennis-uy-sell-phoenix-petroleum-assets-
pay-debt
the decline in fuel prices and growth in volume. Consequently, Gross Margin fell 36% resulting
from the volatile prices of petroleum products and lower domestic volume.

Selling and Administrative Expenses were higher by 11% at Php 5.801 billion and OPEX per liter
improved by 47% to Php 1.37 as the company continued to implement cost-effective programs
aimed to streamline its processes and reduce cost. Net Non-operating Charges were lower by
48% at Php 1.407 billion as interest expenses decreased and as recognized fair value gains on
investment properties, finance income, equity share in the JV income, and other income
increased.

Operating Income was lower by 72.3% at Php 1.244 billion, while Net Income After Tax (NIAT)
declined by 95.7% to Php 62.56 million. Comprehensive Income was 49% down at Php 0.767
billion attributable to higher translation adjustment losses related to PNX SG’s operations offset
by the Php 1.194 billion gain on revaluation of land.
Income Statement
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