PSE Circular for Brokers No. 1864-99

July 28, 1999 PSE CIRCULAR FOR BROKERS NO. 1864-99 Press Release July 27, 1999 PETRON'S INCOME DECLINES IN 1ST HALF '99 Petron posted a net income of P1.9 billion in the first half of the year, or about 17.6 per cent lower than its income in the same period last year. The drop reflects the decline in the Company's sales to P27.2 billion versus P30.9 billion in 1998. "The first-half results are better than we expected," noted Petron Chairman and CEO Jose A. Syjuco Jr., "given the continuous increase in crude prices since March." Petron has been unable to fully recover higher crude costs, partly because of price competition from the other major players, and partly because product price adjustments have been tempered by social considerations. Petron's overall sales volume amounted to 25.6 million barrels. Compared to 1998, this represents a decline of around 13 per cent. It shows some recovery, however, when viewed against the volume decline of around 17 per cent in the first quarter. This recovery is partly because of the improvement in sales to Napocor, the Company's biggest customer. But it is also because of a growth of about 6 per cent in sales to other accounts. Gasoline sales, in particular, grew by around 10 per cent, reflecting the success of Petron's aggressive retail marketing activities. Thus, despite the decline in income, Petron has recaptured its lead in the domestic oil market, with a share of over 39 per cent versus the two other major players. PETRON CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND UNAPPROPRIATED RETAINED EARNINGS For the Six-Month Period Ending June 30, 1999 and 1998 (Amounts in Millions of Pesos) January to June 1999 1999 1998 SALES 27,236 30,890 COST OF GOODS SOLD 22,471.00 26,178.00 GROSS PROFIT 4,765 4,712.00 OPERATING EXPENSES 1,688 1,557 INCOME FROM OPERATIONS 3,077 3,155 OTHER INCOME/(CHARGES) (58) 284 INCOME BEFORE INCOME TAX 3,019 3,439 PROVISIONS FOR INCOME TAX 1,115 1,130 NET INCOME BEFORE MINORITY INTEREST 1,904 2,309 EQUITY OF MINORITY INTEREST 5 5 NET INCOME AFTER MINORITY INTEREST 1,899 2,304 UNAPPROPRIATED RETAINED EARNINGS AT BEGINNING OF THE PERIOD 6,406 4,823.00 Cash dividend P0.20 a share -1,875 - UNAPPROPRIATED RETAINED EARNINGS AT END OF PERIOD 6,430 7,127.00 ====== ====== Certified by: (SGD.) MARIO S. LUCAS Manager Controllers Department PETRON CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in Millions of Pesos) As of 6/30/99 12/31/98 ASSETS Current Assets Cash and cash equivalents 9,712 7,985 Short-term investments 277 34 Receivables net 5,988 5,665 Inventories net 7,520 6,513 Other current assets 288 281 Total Current Assets 23,785 20,478 Property, Plant and Equipment 22,635 21,521 Investments 209 211 Other Assets 409 590 TOTAL ASSETS 47,038 42,800 ====== ====== LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities Short-term loans 14,177 11,617 Liabilities for crude oil and petroleum product importation 1,837 1,700 Accounts payable and accrued expenses 6,925 5,437 Total Current Liabilities 22,939 18,754 Non-current Liabilities 6,129 6,096 Total Liabilities 29,068 24,850 Capital Stock Authorized-10,000,000,000 shares Par value-P1 per share Issued and outstanding 9,375 9,375 Retained Earnings Appropriated 2,136 2,136 Unappropriated 6,430 6,406 Accumulated Translation Adjustment 29 33 Total Stockholders' Equity 17,970 17,950 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 47,038 42,800 ====== ====== Certified by: (SGD.) MARIO S. LUCAS Manager Controllers Department PETRON CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Millions of Pesos) January to June 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net income 1,899 2,304 Adjustments to reconcile net income to net cash provided by operating activities Provision for deferred income tax 154 1,029 Net unrealized foreign exchange loss (gain) (87) 499 Depreciation and amortization 678 682 Changes in assets and liabilities: Decrease (increase) in: Receivables trade (570) 206 Inventories (1,007) (1,006) Other current assets (14) (172) Increase (decrease) in: Liabilities for crude oil and petroleum product importation 137 81 Accounts payable and accrued expenses 969 546 Other current liabilities 363 (4) Net cash provided by operating activities 2,522 4,165 CASH FLOWS FROM INVESTING ACTIVITIES Additions to Property, plant and equipment (1,974) (4,711) Reductions from (additions to): Short-term investments (233) 82 Long-term investments (2) 192 Decrease (increase) in: Receivables others 299 (292) Other assets 175 194 Net cash used in investing activities (1,735) (4,535) CASH FLOWS FROM FINANCING ACTIVITIES Net availment/(settlement) of short-term loans 2,705 (7,684) Cylinder Deposits/Others 111 98 Cash dividends (1,875) - Net cash provided by (used in) financing activities 941 (7,586) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1) 272 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,727 (7,684) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 7,985 18,474 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 9,712 10,790 Certified by: (SGD.) MARIO S. LUCAS Manager Controllers Department