Sunday, July 4, 2010
By Syed Jaymal Zahiid
KUALA LUMPUR: The Barisan Nasional-led federal government risks jeopardising the national oil company's profitability if it keeps sucking Petronas dry, says the DAP chief economist Tony Pua.
Pua said Petronas is still giving out high dividends worth RM30 billion to the government despite its sharp drop in profit for the 2010 financial year.
New Petronas CEO Datuk Shamsul Azhar Abbas recently pointed out that the company's profit after dividend distribution amounted to just RM10.3 billion, a drop of 52.2% from the previous year.
He also warned that the dividend payouts could constrain the company's growth plans.
Pua said the sharp decline in profits and high dividend payouts are disrupting Petronas' re-investment prospects pivotal to generate future revenues.
His research indicated the amount of profits left for re-investment has dropped from a high 42.5% in 2005 to a record low of 13.5% this year.
On the other hand, the dividend payout ratio skyrocketed to 74% this year compared with 57% last year. According to Petronas, dividend payout to the government was steadily increasing from a mere RM9.1 billion in 2005 to RM30 billion last year.
"The company clearly cannot afford to maintain sky-high dividends for the government given the sharp drop in profit," Pua told a press conference at Parliament House here today.
Bleak future for Petronas
Pua, the Petaling Jaya Utara MP, said the lack of funds for re-investment will severely impede Petronas' ability to secure future revenue, thus reducing its long-term productivity, profitability as well as efficiency.
"The dividend paid by Petronas... like any other companies, must be dictated by the needs of the company and not by the wants of the shareholders, which in this case is the Malaysian government," said Pua.
The revelation by Petronas that it needs substantial investments to expand in order to increase recoverability from oil and gas fields signals a need to retain profit, added Pua.
"A company should only have a high dividend payout ratio when it no longer has use of the profits to generate additional future profits, which is clearly not the case for the capital-intensive oil and gas industry," stressed Pua.
Legislating that Petronas retains at least 50% profit for such purpose, investing high profits in productive sectors and saving 20% of revenue for a national stimulus fund for bad times would ensure the national oil company maintain its profitability and growth.
Petronas is one of the few successful Malaysian multi-national companies that is listed in the Forbes Fortune 500.
at 11:12 PM