Fuel retailers try to plug Q1 bleeding
Local fuel retailers are attempting to cut operating costs to cope with a sharp fall in demand as the coronavirus pandemic shuts down global air and road travel.
Typically the first quarter is the highest period of growth for the retail fuel sector in Thailand, in step with the tourism high season. This year, first-quarter sales have shown no growth and could even shrink.
Mostly state-owned Bangchak Corporation plans to cut operating costs in all business segments: exploration/ production, oil refining, retail, trading and renewable power generation.
Bangchak president Chaiwat Kovavisarach said the company is attempting to increase earnings before interest, tax, depreciation and amortisation (ebitda) this year by shifting focus to expanding high-potential business units, including power, mining, biofuels and lithium-ion batteries.
The company expects to add at least 10 billion baht on its balance sheet this year, up from 9.7 billion baht last year.
“Fuel retail in the first quarter normally sees 3-4% growth each year because of tourism, but this year growth disappeared and may see a shrinkage,” Mr Chaiwat said.
This year, Bangchak’s oil refinery unit may see lower revenue and ebitda because of an annual 40-day shutdown for maintenance. The utilisation rate this year is expected to drop to 106 kilobarrels of oil equivalent per day from 113 last year.
The oil refining business will also be hit by drastically lower demand for jet fuel and diesel as flights are cancelled.
This year Bangchak is allocating a budget for capital expenditure of 29.8 billion baht for business expansion in renewable power, oil refinery improvement, bio-based product and fuel retailing.
State-owned PTT Oil and Retail Business (PTTOR) is not only cutting operating costs, but it also plans to launch a sales promotion campaign during the second quarter of this year after experiencing near zero growth for the first two months of 2020.
Boonma Phonthanakornku, senior executive vice-president for retail business at PTT, said the company is planning to launch a promotional campaign targeting motorists to raise brand awareness among consumers.
The retail fuel industry in Thailand normally sees cut-throat competition, and this year the virus will further shred the industry.
One of the direct sales promotions is the privilege member card, for which PTTOR plans to expand benefits and promote mileage collection.
Mr Boonma declined to reveal further details about the plan. PTTOR has 6 million mileage card holders.
Mr Boonma said the measure to widen the price gap between biodiesels B10 and B7 by three baht per litre and between B20 and B7 by 3.50 baht per litre offers an opportunity to promote diesel.
PTTOR is planning a sales promotion of gasohol E20 this year by focusing on blending additives with petrol blend ethanol from cassava or sugar residue.