The negative impacts of the Covid-19 pandemic and the decreasing in oil prices
The acute respiratory disease caused by the novel coronavirus (Covid-19), which began in January 2020, has been negatively affecting all aspects of economies globally.
Meanwhile prices of crude oil and oil products have plummeted since the end of January. The prices have fallen sharply since the beginning of March 2020 (down from $68.4 per barrel on December 31, 2019 to only to $22.2 on March 23, a decrease of 67.5%). Oil prices dropped due to the decreasing demands following by the impact of the pandemic and unchecked of the disease.
In domestic market, demands petroleum also fell sharply due to (i) the severe impact of the pandemic on travel and tourism restriction, suspensions of school and festivities across the country, (ii) meanwhile transportation has also been restricted following the government’s order. (iii) Petroleum demand fell as factories and enterprises operate moderately or even suspend operation due to lack of raw materials.
The double whammy has wiped off revenue from all sale channels of PVOIL and its subsidiaries, a reduction of about 20% over the same period last year, a record drop in revenue.
Averaged business cost per liter of petroleum has sky-rocketed while PVOIL and its subsidiaries had to increase the commission for boosting sale while incurring losses due to decision to reduce price for inventory product.
Building plan to cut operational costs under the scenarios of the Covid-19 pandemic and oil price situation.
In response to the crisis caused by coronavirus pandemic and falling oil prices, PVOIL has issued a Directive on “Drastically deploying production and business solutions, saving cost for completing tasks and targets planned for 2020”.
PVOIL and its subsidiaries have reviewed and built plan to reduce costs to overcome the current difficult situation under three scenarios:
Scenario 1: Difficulties due to the impact of the Covid-19 pandemic and the decline in oil prices create impact in the first and second quarters of 2020; Oil price and gasoline demand will recover in the remaining 2 quarters; Business results decreased by 10% compared to the plan.
Scenario 2: Difficulties due to the impact of the Covid-19 pandemic and the decline in oil price impact lasted until the third quarter of 2020; Business output decreased by 20% compared to the plan.
Scenario 3: Difficulties due to the impact of the Covid-19 pandemic and the decline in oil prices have profound impacts on the global economy and Vietnam. Businesses, factories, enterprises will have to shut down operations due to lack of raw materials. Business output fell by 30% and even more than 30% compared to the plan.
Regarding business solutions, PVOIL closely monitors market developments and the State's management to be flexible in supplying petroleum for business units, meanwhile amount of inventory is always strictly controlled to minimize damage caused by reducing inventory prices.
The corporation will have solutions to maintain sale volume by optimizing business efficiency in all stages including preparation, transportation, delivery and storage.
Regarding solutions to implement anti-wastefulness, reduce operating costs, PVOIL reduces expenses that is not directly related to production and business, giving priority to boost production and enhance efficiency. The corporation will suspend deploying tasks of repairing and maintenance as well as minimizing expenses for working, holiday and meeting, promotion.
Especially, all employees have agreed to reduce their monthly salary by up to 25% to share difficulties with the company. The solution is applied from March 2020 to June 2020. This could be adjusted according to the actual situation.
Regarding the solution to fight against Covid-19 pandemic, PVOIL has carried out several community activities and collected positive results. The company’s staffers donated 50,000 medical masks to customers and residents at PVOIL petroleum stations in Ho Chi Minh City, Hanoi, Da Nang, Can Tho, Hai Phong and Vinh Phuc.
In response to the Government's call, PVOIL donated VND100 million to buy a virus test kit. The corporation proactively arranges and ensures up to 50% of workers working remote to protect health and limit virus spread daily.
In addition, PVOIL continues to promote non-cash payment solutions to customers when buying gasoline. This is a unique competitive product and service of PVOIL and a solution to help customers limit cash exposure, limiting the risk of disease transmission.
Maintain business activities in a difficult economy
Although sale revenue has decreased, PVOIL has effectively been exploiting its business strengths. Sales volume for industrial customers in the first quarter of 2020 reached 109% over the same period.
Sales volume through PVOIL Easy, the electronic payment solution for business customers and individual customers, increased compared to 2019.
Specifically, the volume of transactions increased from 115 m3/day in January 2020 to 137 m3/day in February 2020 and 146 m3/day in March 2020, while the average output of the whole year 2019 is only 123 m3/day.
These solutions and figures are not enough to evaluate the efficiency of production and business of the corporation, but they indicate that the entire company has deployed strategies and promptly responded to the negative impacts of the downward economy.
PVOIL’s leaders and employees have been cooperating and working together to implement several solutions to help the corp. to minimize losses, maintain business activities and jobs for workers to overcome this difficult period together./.
PVOIL promotes sales through non-cash payment applications
PVOIL staffers present medical masks at a petroleum station to help prevent the coronavirus pandemic