(From left) Petronas Dagangan Bhd chief financial officer Farzlina Ahmad Murad, managing director and chief executive officer Azrul Osman Rani, chairman Datuk Anuar Ahmad, and chief operating officer Khalil Jaffri Muhammad Muri at the press conference after the company's 41st annual general meeting at the Kuala Lumpur Convention Centre on Wednesday (May 10). (Photo by Zahid Izzani Mohd Said/The Edge)

KUALA LUMPUR (May 10): Petronas Dagangan Bhd (PetDag) will continue to embark on an aggressive expansion of its convenience business, even though profit for the segment dropped markedly year-on-year (y-o-y) in the financial year ended Dec 31, 2022 (FY2022).

At a press conference after PetDag's annual general meeting on Wednesday (May 10), managing director and chief executive officer Azrul Osman Rani said the decrease was only to be expected, given that the convenience segment was still in the early stages of development.

For FY2022, PetDag’s convenience or “non-fuel” segment contributed RM16.12 million or 1.4% of its operating profit of RM1.15 billion.

The segment saw a 60% decline in profit before tax (PBT) to RM15.7 million, from RM39.4 million for FY2021. Given the segment’s revenue of RM220.82 million for FY2022, it had a PBT margin of 7.3%.

Azrul, however, is confident that as the convenience segment continues to expand, it will provide a higher revenue share. “A Café Mesra outlet starts to break even around nine months. For those that don't break even, they can be moved to a better location and get more data — what sells where,” he said.

“Over time, it (the number of outlets) will start to increase, and some will take a bit longer and some shorter to break even, but we know what we are tracking in terms of ensuring that the long-term viability of the projects remains."

Meanwhile, according to chief operating officer Khalil Jaffri Muhammad Muri, PetDag has 53 Café Mesra outlets at present, from 40 at end-2022. Khalil indicated that it is possible for the end-2022 figure to be doubled.

Keeping other non-fuel options open

Azrul assured that PetDag is not abandoning its commercial and retail segments, as it believes that the core businesses will remain relevant for many years to come.

Touching on the group's FY2023 prospects, Azrul said PetDag is “cautious but optimistic” in view of Malaysia’s forecast economic growth, higher y-o-y tourist arrivals, inelastic fuel consumption, and because it had also put risk mitigation plans in place.

He pointed out that the group’s move in the non-fuel segment is grounded in prudent allocation of investments to ensure strategic diversification.

On the sidelines, PetDag chairman Datuk Anuar Ahmad said PetDag is cognisant of the need to diversify. He said the group is looking at various other non-fuel businesses, but declined to comment further.

PetDag chief financial officer Fazlina Ahmad Murad, on the other hand, noted that the group had allocated capital expenditure of RM400 million for FY2023 for both its core and non-fuel businesses, but said this may change subject to any new plans or projects.

“The expansion of our growth, especially in convenience, is a journey we need to take on board, and we are testing the market to see where we are in getting through some of the challenges,” she said.

For FY2022, PetDag's net profit jumped nearly 47% y-o-y to RM776.6 million, from RM529.75 million before, on the back of a 62% y-o-y surge in revenue to RM36.7 billion, from RM22.7 billion previously, fuelled by record retail fuel sales volume.

It paid out dividends of 76 sen per share or RM755 million in total for FY2022.

At the time of writing on Wednesday, shares in PetDag were down eight sen or 0.35% at RM22.58, giving the company a market capitalisation of RM22.43 billion.