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After complaining about large losses, the state-owned petroleum trading firm, Vietnam National Petroleum Corp (Petrolimex) released financial reports that show a profit.
Petrolimex\'s books switch from red to black
For some time, Petrolimex has claimed that it was taking huge losses due to Government policies aimed at stabilising the domestic fuel market. In 2008, the firm said that it lost trillions of VND.
In preparation for its initial public offering, though, Petrolimex released their financial reports, which prove that these losses were phony.
According to the reports, the company made a net profit of of VND913 billion (USD44.17 million) in 2008. These profits only rose over the years; to VND2.88 trillion (USD139.32 million) in 2009, VND81.1 billion (USD3.92 million) in 2010.
This year, their net profits are expected to reach VND2.154 billion (USD104.2 million), of which 84% will be from trading petroleum.
Ambiguity
Petrolimex’s suddenly revealed profits are raising public concerns, as their IPO is to be within the next 10 days. In the past, their "losses" helped strengthen the plea for state subsidies and price hikes.
Just few months ago, a Petrolimex executive complained that the company’s ‘durability would be limited’ if the domestic petroleum prices were kept unchanged amid rising prices in the world market.
To support the firm, the Ministries of Industry and Trade, and Finance approved an increase of between 10.36% and 15.3% on various petroleum products from March 29.
Similar price hikes during the past three years have shocked many potential investors who now see that the firm has been making a profit the entire time.
Unreasonable explanation
Nguyen Tien Thoa, head of the Ministry of Finance (MoF)’s Price Management Department explained that most of their profits came from fuel trading abroad. But according to the actual reports, only a small percentage came from re-exports.
The reports also revealed that Petrolimex re-exported only 1.5 million cubic metres of petroleum in 2008 but sold 6.83 million cubic metres of the fuel in the domestic market during the year.
Its domestic petroleum sales amounted to a total of 7.42 million cubic metres in 2009, while it re-exported only 1.89 million cubic metres of fuel. Last year, the domestic sales to re-export ratio was even lower.
Another official from the MoF attributed the profits to the savviness of the traders, who, he says, mitigated losses from previous years by taking advantage of discrepancies between the domestic and foreign markets.
Losses magically turn to profits
Petrolimex General Director, Bui Ngoc Bao, said that these unexpected profits can be attributed a simple difference in calculations.
In 2008, global fuel prices hit record high, resulting in losses for all domestic petrol wholesalers, Petrolimex included, who lost tens of thousands of VND during that year, he said.
In response, the Government set aside VND1.4 trillion to mitigate these losses, subsidising wholesalers by VND1,000 on each litre of gasoline sold.
"Since we considered these losses as covered we did not feel we had to add them to our financial reports," he explained.
He added that Petrolimex incurred losses of VND1.5 trillion (USD72.57 million) in the first five months of the year, but was in the black between June and July.
The company has forecast losses in the next months until September. But they expect the Government to cover these, with up to VND1.2 trillion (USD58 million), in subsidies because they have joined the fuel price stabalisation programme, he said.