A continued slide in Petronas profits will put a damper on government’s ability to spend. — File pic
KUALA LUMPUR, Sept 7 ― Petronas, previously described as Putrajaya’s “piggy bank”, said today it will pay the government RM30 billion in dividends this year despite falling profits and a challenging outlook.
The amount will likely make up more than a third of the state oil company’s net profit, after it said today that it may struggle to hit RM90 billion in pre-tax profit for the year.
Petronas chief executive Tan Sri Shamsul Azhar Abbas said, however, that there is an understanding with the Ministry of Finance that dividends will be capped at 30 per cent of profit starting next year.
“This year we will maintain what was committed,” he said in a media briefing.
Global ratings agencies as well as the World Bank have warned that Malaysia is over-reliant on oil income.
Dividends from Petronas are estimated to make up about 40 per cent of federal government revenues.
If the trend of lower profits extends into next year, the government could see a drop in dividends from Petronas, potentially affecting its fiscal reform efforts to address its chronic budget deficit.
Petronas earned RM70.7 billion in revenue in the second quarter, down three per cent from the same period last year largely due to lower crude oil prices.
Net profit also fell 30 per cent to RM15.2 billion while its gross profit margin shrank to 37.5 per cent from 42.4 per cent.
“Now going into the third quarter, it is going to be worse,” said Shamsul.
By Lee Wei Lian