fs.petrolimex.com.vn€¦ · ABBREVIATIONS BOM Board of Management COCO Company Owned–Company Operated Co., Ltd Company Limited CRM Customer Relationship Management CSR Corporate

DIGITAL TRANSFORMATION DISTINCTION DRIVES US FORWARD

ANNUAL REPORT 2019

ABBREVIATIONS

BOM Board of Management

COCO Company Owned–Company Operated

Co., Ltd Company Limited

CRM Customer Relationship Management

CSR Corporate Social Responsibilities

DO Diesel oil

DODO Dealer Owned–Dealer Operated

ERP Enterprise Resource Planning

GMS General Meeting of Shareholders

Group/Petrolimex/PLX Vietnam National Petroleum Group

IT Information Technology

JCCP Japan Cooperation Center Petroleum

JSC Joint Stock Company

LNG Liquefied natural gas

LPG Liquefied Petroleum Gas

PM Plant maintenance

SMO Sales Management Online

Digital transformation is the integration of technologies and digital into business operations of enterprises and organizations. This process is powerfully taking place around the world and creating enormous impacts on the operation and competitive advantages of enterprises across the globe, including Vietnam.

As a leading economic corporation in Vietnam with a large geographical scale and a wide variety of industries, Petrolimex keeps learning and acquiring the quintessence of the world.

Realizing the benefits of digital transformation, Petrolimex has been actively developing digital transformation strategies since the 2000s, which actually initiated in 2010 and has been made major breakthroughs since 2012. Currently, Petrolimex has been implementing an increasingly intensive transformation strategy in all activities in order to accompany the digital economy in the Industry 4.0 era.

DIGITAL TRANSFORMATIONDISTINCTION DRIVES US FORWARD

It can be said that digital transformation drives Petrolimex to promote innovation, increase operational efficiency, make differences, promote competitive advantages in the market and create growth momentum of the Group at present and in future, thereby strengthening the Group’s position nationally and globally.

This is also the reason why Petrolimex chooses the topic of DIGITAL TRANSFORMATION - DISTINCTION DRIVES US FORWARD as the key message of 2019 Annual Report.

With this message, Petrolimex chooses polygon style with sharp, strong and modern outlines to create a sense of connection with the trend of the times throughout the report. Right from the cover, the harmonious combination of the image of the oil flow and the polygons leaves a deep impression about Petrolimex’s determination to make breakthroughs and success in the Industry 4.0 era.

DIGITAL TRANSFORMATION - DISTINCTION DRIVES US FORWARD not only is a commitment of pioneering digital technology by a leading enterprise, but also contributes to spreading the trend of digital transformation in the 4.0 revolution. Together, we can take the country firmly into the new era with new breakthroughs.

DIGITAL TRANSFORMATION

IN SERVICE QUALITY

DIGITAL TRANSFORMATION IN RESEARCH AND

DEVELOPMENT

DIGITAL TRANSFORMATION

IN CORPORATE GOVERNANCE

2019 ANNUAL REPORT DIGITAL TRANSFORMATION - DISTINCTION DRIVES US FORWARD2 3

61,762

6-7

80%

9% 10.3% 11.1% 6.7% 15.9%

189,604

22.5

5,648

2.2 2,700 2,800 +

WHAT ATTRACTS INVESTORS TO PLX STOCKS?

THE HIGHEST MARKET SHARE IN THE COUNTRY

SOLID FINANCIAL CAPACITY

STABLE GROWTH

LARGE MARKET CAPITALIZATION HIGH LIQUIDITY

CASH DIVIDENDS AT A HIGH AND STABLE LEVEL

CORPORATE GOVERNANCE UNDER INTERNATIONAL STANDARDS

TRANSPARENT INFORMATIONCLEAR STRATEGIC ORIENTATION

HIGH GROWTH POTENTIAL

PLX IS THE LEADING STOCK IN VIETNAMESE PETROLEUM TRADING INDUSTRY

TOTAL ASSETS

GDP GROWTH RATE

OF ANNUAL PROFITS ARE PAID CASH DIVIDENDS ON AVERAGE

NET REVENUE

PROFIT BEFORE TAX

PROFIT AFTER TAX

TOTAL ASSETS

OWNERS’ EQUITY

CAGR 2015 – 2019

TOTAL REVENUE

GROWTH RATE OF CAR SALES VOLUME

PROFIT AFTER TAX

A SYSTEM OF STORAGE TANKS AND RESERVOIRS OF THE LARGEST CAPACITY NATIONWIDE

A LARGEST SCALE OF DISTRIBUTION NETWORK

VND BILLION

%/YEAR

VND BILLION

%/YEAR

VND BILLION

MILLION M3

66,686 752,917

LARGE MARKET CAPITALIZATION (as at 31 December 2019)

THE AVERAGE TRADING VOLUME IN 52 WEEKS (from 01 January to 31 December 2019)

VND BILLION STOCKS/DAY

COCOs DODOs

LOW AVERAGE CONSUMPTION OF PETROLEUM PER CAPITA IN THE REGION, THE POTENTIAL LNG INVESTMENT PROJECT BRINGING HIGH ECONOMIC BENEFITS IN FUTURE.


PETROLIMEX OVERVIEW

Vision – Mission – Core values

Chairman’s letter

General Director’s letter

General information

Key milestones

Core businesses and market place

Governance framework and Group’s organizational structure

Board of Management

Board of General Directors

Supervisory Board

Awards and Recognitions

10

14

16

18

20

22

24

26

30

34

36

40

48

52

54

DEVELOPMENT STRATEGIES

Petrolimex’s digital transformation story

SWOT analysis

Growth drivers

Development orientation

BUSINESS PERFORMANCE

SUSTAINABLE DE VELOPMENT REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

Report and evaluation by Board of Management

Report and evaluation by Board of General Directors

Business performance

Organization and human resources

Investment activities and project implementation

Consolidated financial performance

Business and financial performance of member companies

Shareholders’ structure, owner’s equity changes

162 Report overview

164 Goals and orientations of sustainable development strategy

167 Stakeholder engagement

170 Environmental standards

182 Economic efficiency

184 Social standards

122 The Board of Management’s structure and activities

136 The Supervisory Board’s structure and activities

137 Report of Supervisory Board

140 Transactions, remuneration and benefits of the Board of Management, Board of General Directors, Supervisory Board

140 Transactions of internal shareholders and related persons

141 Internal control system

144 Risk management

156 Legal affairs and compliance

Statement of the Board of General Directors

Independent auditor’s report

Consolidated balance sheet

Consolidated statement of income

Consolidated statement of cash flows

Notes to the consolidated financial statements

62

68

92

96

100

102

106

118

191

192

194

198

200

202

01 02 03 0504 06

CONTENTS

DIGITAL TRANSFORMATION DIGITAL TRANSFORMATION DIGITAL TRANSFORMATION

DISTINCTION DRIVES US FORWARDFORWARD

DISTINCTION DRIVES US

PETROLIMEX OVERVIEW

01 Vision – Mission – Core values Chairman’s letter General Director’s letter General information Key milestones

Core businesses and market place

Governance framework and Group’s organizational structure

Board of Management

Board of General Directors

Supervisory Board

Awards and Recognitions

Maintaining its position as one of the largest corporations in Vietnam, leading the petroleum downstream business; Continuing its petroleum business as the primary operation, expanding in the fields of liquefied petroleum gas, petrochemical, petroleum transportation, import and export, insurance, etc. becoming one of the top 10 enterprises in the country in terms of the largest market size and the highest economic efficiency.

VISION MISSIONRaising shareholders’ value, bringing welfare to employees, communities; raising the value of life; contributing to the country’s socio-economic development.

CORE VALUES

BRAND VALUES BRAND PERSONALITIES

HERITAGE

National pride

DEVELOPMENT

We never stop striving to innovate and better

ourselves

HUMANITY

We center our activities around serving

humanityDIVERSITY

We highly appreciate

difference and diversity

OPTIMISM

We always believe in a brighter future

TRUST

We always keep our “Promise”

ENTHUSIASM

We love what we do

RESPONSIBILITY

We care about employees, customers,

the environment and the surrounding

community


The year 2019 marks a relatively comprehensive growth for Petrolimex in business performance. Despite facing a lot of difficulties and challenges from the fierce competition in the market to the uncertainty of world oil price, Petrolimex still exceeded almost all criteria of 2019 business plan set by the General Meeting of Shareholders. Petrolimex’s success is driven by the best efforts, unanimity and determination of the Board of General Directors and employees with the direction of the Board of Management.

2019 is also the third consecutive year that Petrolimex was named as the Champion of Revenue among Top 50 best listed companies 2019 in Vietnam by Forbes Vietnam with 2019 revenue reaching USD 8.35 billion. Additionally, Petrolimex was also honored to give plenty of awards in the field of governance and brand value by reputable rating organizations in the world.

Regarding sustainable development, we are proud of being a socially responsible enterprise, respecting and balancing the benefits of all stakeholders, protecting the environment and making a great contribution to the State Budget through tax payment. Petrolimex is always pioneering in supply of clean and environmentally-friendly energy products to the market. Besides, to minimize environmental pollution and prevent leakages, we have invested trillions of VND in the research and application of science and technology to operations. This further confirms Petrolimex’s business philosophy over the past 64 years, which is sustainable development associated with environmental protection to build a green environment to the community and make a significant contribution to ensuring social security and national security.

In 2019, Petrolimex continued to promote the digital transformation strategy and apply achievements of the Industry 4.0 revolution to the governance and operation of petroleum business throughout the system. We have researched and conducted a number of key projects such as implementation of decision-making supporting system, management and administration of business intelligence (BI) and big data, additional provision of

Dear value shareholders, customers and partners,

utilities in petroleum purchase and payment through modern methods such as automated sales, card payment, mobile payment, loyalty programs, customer appreciation, etc.

The year 2020 is forecasted to be a challenging year for the management and business activities of Petrolimex with many abnormal fluctuations of oil prices, global political instability and especially the outbreak of Covid-19 pandemic. In this context, the Board of Management of Petrolimex has directed the Board of General Directors to develop specific business strategies and business scenarios for timely response to worst-case scenarios; drastically implemented solutions of cost reduction; enhanced the risk management and prediction on movements of the petroleum trading market; strongly promoted value-added services in addition to petroleum in order to leverage full advantage of distribution network across the country.

With the historical tradition, unanimity and determination from more than 24,000 officers and employees and led by a talented, experienced and dedicated leadership team, the Board of Management believes that Petrolimex will overcome all difficulties to firmly develop and achieve the set goals.

On behalf of the Petrolimex Board of Management, I would like to thank for all confidence, support, cooperation and companionship from the value shareholder, customers and partners. I wish everyone good health, well-being and prosperity in 2020.

Chairman

Pham Van Thanh

2019 is also the third consecutive year that Petrolimex was named as the Champion of Revenue among Top 50 best listed companies 2019 in Vietnam by Forbes Vietnam with 2019 revenue reaching USD 8.35 billion

CHAIRMAN’S LETTER

TOTAL REVENUE 2019

USD BILLION

8.35


In 2019, Petrolimex kept affirming the systematic sustainability as well as the efficiency in governance from the Group to member units. In this context of concurrent opportunities and challenges, the Group still achieved several highly valued results in the following areas:

» Ensured absolute safety in production and business process and no incidents related to fire prevention, environmental safety occurred in petroleum projects.

» The fifth consecutive year that the Group completed and exceeded planned criteria assigned by the GMS:

• Total consolidated volume of petroleum sold reached almost 13.9 million tons m3, an increase of nearly 8.1% in comparison to 2018, in which domestic sales volume increased 5.5% compared to that in 2018;

• Total consolidated revenue reached approximately VND 190 trillion, equivalent to that in 2018;

• Total consolidated profit before tax reached VND 5,650 billion, rising 9% in comparison with that in 2018.

Dear valued shareholders, customers and partners,

» Maintain the position as one of focal points with full compliance with Decision No. 49/2011/QD-TTg and Decision No. 53/2012/QD-TTg of the Prime Minister on E5 RON 92 Euro II and DO 0.001S Euro V. Simultaneously, the Group completed the preparation of cargo supplies, infrastructure and technology conditions, etc. in order to make business available and put new marine fuels up for sale in timely compliance with the Sulphur Cap Regulation of International Maritime Organization (IMO) from 01 January 2020;

» Enhance communication through Petrolimex brand promotion activities;

» Actively support management and administration throughout the entire Petrolimex system by digital transformation. In Petrolimex, the digital transformation has been prepared since the IPO, starting with the implementation and application of advanced solutions of enterprise resource planning ERP_SAP, and further expanded through key projects such as: A management software system of warehouse, petroleum station, electronic invoice, electronic document, etc.; thereby standardizing the management process of daily business activities and the internal management process according to actual requirements, contributing to the formation of a modern and dynamic corporate culture.

Vietnam National Petroleum Group will continue to maintain and promote its leading position in the petroleum downstream sector, and also make efforts to become the top energy Group in Vietnam with the orientation of high-quality product development, and brand new and environmentally friendly energy sources.

2020 is forecasted to be the year with lots of difficulties and challenges. Since the early months of 2020, the world has suffered the Covid–19 pandemic, leading to a risk of global economic recession. For Petrolimex, in addition to these adverse factors, the Group’s operations have been affected by the plummet of oil price from the beginning of 2020 to the present. At the trading session of 21 April 2020, it was the first time the WTI crude oil future price delivered in May plunged to a negative level (below zero).

The above-mentioned unfavorable factors have posed many challenges in the implementation of 2020 plan. Along with its efficient and absolutely safe organization of production and business process in all core areas, Petrolimex will also do its best to develop system, maintain

the sustainable growth rate so as to firmly hold its market share as well as improve the Group’s performance of internal management as a concrete foundation for the Group’s development for the next period 2021 – 2025.

Petrolimex will consequently aggregate its resources and solutions to implement the following main objectives:

» Synchronously deploying solutions in order to complete the business and production plan for 2020; implementing all methods of cost reduction from Parent company to member units;

» Maintaining the implementation of digital transformation strategy, aggregating its resources, adopting technological solutions to solve main problems such as: Improving and upgrading the infrastructure of existing information system, completing the information development strategy, and optimizing the effectiveness of components on ERP_SAP; Implementing a non-cash payment solution and customer relationship management (CRM) system; Deploying BI, an information system supporting leaders in decision-making; etc.

» Continuing to research into solutions to utilize and increase utilities in its petroleum station system; aggregating its resources for the development of its petroleum station system.

With great responsibility to the shareholders, the Board of General Directors and all employees of Vietnam National Petroleum Group will strive to comprehensively meet the planned targets for 2020 and the long-term goals for the upcoming period of development in the future.

On behalf of the Board of General Directors, I would like to thank the value customers, government agencies, shareholders and investors who have constantly supported us and placed their unceasing trust in Petrolimex. We hope that we will continue to earn your trust and support in the future.

General Director

Pham Duc Thang

GENERAL DIRECTOR’S LETTER

Vietnam National Petroleum Group will continue to maintain and promote its leading position in the petroleum downstream sector, and also make efforts to become the top energy Group in Vietnam with the orientation of high-quality product development, and brand new and environmentally friendly energy sources.


GENERAL INFORMATION

Trading name VIETNAM NATIONAL PETROLEUM GROUP

Abbreviated name PETROLIMEX

Stock symbol PLX

Enterprise Registration Certificate No. 0100107370

Charter capital VND 12,938,780,810,000

Address No.1 Kham Thien Street, Kham Thien Ward, Dong Da District, Hanoi, Vietnam

Telephone +84 24 3851 2603

Fax +84 24 3851 9203

Website http://www.petrolimex.com.vn

CHARTER CAPITAL

MEMBER UNITS DIRECTLY TRADING IN

PETROLEUM

PETROLEUM STATIONS ACROSS THE COUNTRY

GROUP OVERVIEW

VND12,938,780,810,000

43

5,500

Vietnam National Petroleum Group (in abbreviation: Petrolimex) was established from the equitization and restructuring of Vietnam National Petroleum Corporation. Principal business activities of Petrolimex are importing/exporting and trading petroleum, refinery and petrochemical products, making capital investments in other enterprises with similar business activities and others in accordance with the legal regulations.

In the domestic petroleum market, Petrolimex affirms the leading position in proper compliance with the Government’s guidelines. Along with 30 other petroleum key traders and over 120 petroleum distributors, Petrolimex guarantees the adequate and timely distribution of petroleum, serving the nation’s socio economic development, national security and defense as well as our people’s consumption demand. Petrolimex has 43 member units directly trading in petroleum throughout the country. Overseas, Petrolimex owns Petrolimex One-member Limited Liability Company in Singapore, Petrolimex One-member Limited Liability Company in Laos and Petrolimex Representative Office in Cambodia. There is a retail network of 14,000 petroleum stations of all economic sectors nationwide, of which Petrolimex’s retail network has more than 5,500 petroleum stations across the country, generating favorable conditions for consumers to use products and services directly provided by Petrolimex. Based on the actual output of petroleum sold on the domestic market, Petrolimex actually accounts for 50% in market share on the national scale. In addition to petroleum products, other products and services at Petrolimex petroleum stations such as lubricants, gas, insurance, banking, etc. produced and supplied by its member units are available. Petrolimex is always a pioneer in new technology adaption to its business performance, increasing labor productivity, improving customer satisfaction and also ensuring safety, energy security, effective management and business.

KEY MILESTONES

1956

The forerunner of Vietnam National Petroleum Corporation was the Oil, Lub and Grease Corporation which was set up by Decree No. 09/BTN, issued on 12 January 1956 by The Ministry of Commerce.

2012

Vietnam National Petroleum Group o fficially became a public company as per document No 2946/UBCK-QLPH dated 17 August 2012 by the State Securities Commission.

1995

Vietnam National Petroleum Corporation (Petrolimex) was reestablished pursuant to Decision No 224/TTg, dated 7 April 1995 by the Prime Minister.

2011

Vietnam National Petroleum Group (Petrolimex) was instituted from the equitization and restructuring of Vietnam National Petroleum Corporation pursuant to Decision No 828/QD-TTg dated 31 May 2011 by the Prime Minister.

Petrolimex successfully held its initial public offering (IPO) on Hanoi Stock Exchange (HNX) on 28 July 2011.

Vietnam National Petroleum Group operated officially in the form of Joint Stock Company model from 01 December 2011 pursuant to Enterprise Registration Certificate No. 0100107370.

2016

On 26 May 2016, Petrolimex successfully issued individual shares to JX Nippon Oil & Energy Vietnam Consulting and Holdings Company Limited, and raised the charter capital from VND 10,700 billion to VND 11,388 billion.

Petrolimex was licensed with Certificate of Securities Trading Code Registration No. 35/2016/GCNCP-VSD dated 25 April 2016 and “PLX” as stock symbol.

On 28 July 2016, Petrolimex issued redeemable preferred shares to current shareholders to raise the charter capital by 15%, from VND 11,388 billion to VND 12,938 billion.

2017

On 21 April 2017, stocks of Petrolimex were listed on the Ho Chi Minh City Stock Exchange (HOSE) with stock symbol PLX.

2018

Petrolimex signed a Memorandum of Understanding with Vietnam Electricity Corporation (EVN) on investment and development cooperation in the clean energy industry.

2019

Petrolimex signed a Memorandum of Understanding with JXTG Holdings, the number one energy corporation in Japan, on research in LNG & Gas industries in Vietnam.

The Group successfully sold 32 million treasury shares on the stock market and gained nearly VND 2,000 billion.

Hoang Sa Islands

Truong Sa IslandsPhu Quoc Island

Cambodia

Ho Chi Minh City

CORE BUSINESSES AND MARKET PLACE

DOMESTIC

The Group’s companies, branches and enterprises are located in 63 out of 63 provinces and cities nationwide.

MARKET PLACE

Laos

Singapore

PROVINCES AND CITIES NATIONWIDE

COUNTRIES IN THE WORLD

63/63

04

OVERSEAS

Petrolimex Singapore,

Petrolimex Laos,

Representative office in Cambodia.

CORE BUSINESSES

VIETNAM NATIONAL PETROLEUM GROUP (PETROLIMEX)

PETROLEUM DISTRIBUTION

(referred to as “Petroleum”)

PETROCHEMICAL DISTRIBUTION

(referred to as “Petrochemical”)

GAS DISTRIBUTION

(referred to as “Gas”)

PETROLEUM TRANSPORTATION DISTRIBUTION

(referred to as “Petroleum

transportation”)

OTHERS

(insurance, banking, construction, trading, etc.)


GOVERNANCE FRAMEWORK AND GROUP’S ORGANIZATIONAL STRUCTURE

MANAGEMENT STRUCTURE

GENERAL MEETING OF SHAREHOLDERS

REPRESENTATIVE OFFICES

REPRESENTATIVE OFFICE IN HO CHI MINH CITY

47 WHOLLY-OWNED COMPANIES/

CORPORATIONS

45 DOMESTIC CORPORATIONS/ ONE-

MEMBER LIMITED LIABILITY COMPANIES

PETROLIMEX SINGAPORE ONE-MEMBER LIMITED

LIABILITY COMPANY

PETROLIMEX LAOS ONE-MEMBER LIMITED LIABILITY

COMPANY

4 CORPORATIONS WITH MORE THAN 50% OF

STAKES DIRECTLY OWNED BY THE GROUP

REPRESENTATIVE OFFICE IN CAMBODIA

51 SUBSIDIARIES 9 JOINT-VENTURES, ASSOCIATES

SUPERVISORY BOARD

BOARD OF MANAGEMENT

BOARD OF GENERAL DIRECTORS

SUBSIDIARIES, ASSOCIATES

45 wholly-owned petroleum subsidiaries and 22 subordinate branches.45

02 2 wholly-owned subsidiaries, namely

4 Corporations with more than 50% of stakes directly owned by the Group.

04

099 Joint-Ventures and Associates with more than 20% of their charter capital owned by the Group.

Of which, there are:

» 43 One-member Limited Liability Petroleum Companies in Vietnam

» 01 One-member Limited Liability Company in Singapore

» 01 One-member Limited Liability Company in Laos

Petrolimex Tanker Corporation (PGT) providing water-way petroleum transportation;

Petrolimex Transportation Services Corporation (PTC) providing inland petroleum transportation and trading petroleum.

LISTS OF SUBSIDIARIES, ASSOCIATES (For more details please refer to the Financial Statements from pages 225 – 230)


MR. PHAM DUC THANGBOM member

Year of birth 1961

Nationality Vietnamese

Qualification Master degree in Economics

Politic qualification Advanced

Foreign language English, Russian

Current position Petrolimex General Director

Working experiences

2006 – 2012 Head of Import-Export Department, Vietnam National Petroleum Corporation

2012 – 2016 Deputy General Director of Vietnam National Petroleum Group

2016 – 2017 BOM member, Deputy General Director of Vietnam National Petroleum Group

2017 – present BOM member, General Director of Vietnam National Petroleum Group

Positions in other organizations: None

BOARD OF MANAGEMENT

MR. YOSHIHIRO SATOBOM member – Non-executive

Year of birth 1958

Nationality Japanese

Foreign language English

Positions in other organizations Senior Vice President of JXTG Energy

MR. PHAM VAN THANH Chairman

Year of birth 1972


Qualification Master degree in Business Administration, Bachelor degree in Accounting



Current position Chairman (full-time)

Working experiences

2005 – 2009 Head of Property and Fire Insurance Department, Office of Petrolimex Insurance Corporation

2009 – 2013 Director of PJICO Hai Phong Branch, Petrolimex Insurance Corporation

2013 – 2018 BOM member, General Director of Petrolimex Aviation Fuel JSC

2018 – present BOM Chairman of Vietnam National Petroleum Group

Positions in other organizations

BOM Chairman of Petrolimex Aviation Fuel JSC


MR. LE VAN HUONGBOM member – Non-executive

Year of birth 1963


Qualification Chemical Engineer, Bachelor degree in Economics


Foreign language English, Czechoslovakian

Current position Petrolimex Head of Human Resources and Remuneration Department

Working experiences

1997 – 1999 Deputy Director of Petrolimex Vinh Phu Limited Company

1999 – 2001 Director of Petrolimex Vinh Phu Limited Company

2001 – 2004 Director of Petrolimex Phu Tho Limited Company

2004 – 2008 Head of Sales Department, Vietnam National Petroleum Corporation

2008 – 2013 BOM member, General Director of Petrolimex Aviation Fuel JSC

2013 – 2016 Head of Human Resources and Remuneration Department, BOM member of the Group

2016 – present BOM member, Head of Human Resources and Remuneration Department, BOM of the Group


MR. NGUYEN ANH DUNGBOM member – Non-executive

Year of birth 1971


Qualification PhD in Economics


Foreign language English, Czechoslovakian

Current position Chairman of Board of Members - Petrolimex Tanker Corporation

Working experiences

1996 – 1997 Deputy Chief of Office, Vietnam National Petroleum Corporation

1997 – 2002 Deputy Head of Finance Department, Vietnam National Petroleum Corporation (January 1999: cum Assistant of the BOM Chairman, Vietnam National Petroleum Corporation)

2002 – 2005 Head of Import-Export Department, Vietnam National Petroleum Corporation

2005 – 2013 General Director of Petrolimex Insurance Corporation

2013 – 2018 Chairman of Board of Members cum General Director of Petrolimex Tanker Corporation

2016 – present BOM member of Vietnam National Petroleum Group

2018 – present Chairman of Board of Members, Petrolimex Tanker Corporation

MR. TRAN NGOC NAMBOM member

Year of birth 1965


Qualification Bachelor Degree in Accounting



Current position Petrolimex Deputy General Director

Working experiences

2002 – 2003 Chief Accountant of Petrolimex Hanoi Co., Ltd.

2003 – 2008 Chief Accountant of Vietnam National Petroleum Corporation

2008 – 2011 Director of Finance and Accounting Center, Vietnam National Petroleum Corporation

2011 – 2016 Chief Accountant, Director of Finance and Accounting Center, Vietnam National Petroleum Group

2012 – 2016 Deputy General Director of Vietnam National Petroleum Group

2016 – present BOM member, Deputy General Director of Vietnam National Petroleum Group

Positions in other organizations:

BOM Chairman of Petrolimex Insurance Corporation (PJICO)

Head of the Group’s Capital Representatives, BOM member, Petrolimex Group Commercial Joint Stock Bank PG Bank

MR. NGUYEN THANH SONBOM member

Year of birth 1962


Qualification Master degree in Economics


Foreign language English, Russian

Current position Petrolimex Deputy General Director

Working experiences

1991 – 1997 Deputy Director of Petrolimex Bac Thai Co., Ltd.

1997 – 2002 Head of Organization and Administration Department, Petrolimex Lubricant Corporation subsequently named Petrolimex Petrochemical Corporation

2002 – 2004 Deputy Director of Petrolimex Petrochemical Corporation (February 2004: BOM member, Deputy General Director of Petrolimex Petrochemical Corporation)

2004 – 2008 Head of Personnel Department, Vietnam National Petroleum Corporation

2008 – 2011 Specialized BOM member, Vietnam National Petroleum Corporation

2011 – 2018 BOM member of Vietnam National Petroleum Group

2018 – present BOM member, Deputy General Director of Vietnam National Petroleum Group


BOARD OF MANAGEMENT (continued)


BOARD OF GENERAL DIRECTORS

MR. PHAM DUC THANG General Director

(See “Board of Management” for details about Mr. Pham Duc Thang)

MR. NGUYEN THANH SONDeputy General Director

(See “Board of Management” for details about Mr. Nguyen Thanh Son)

MR. TRAN NGOC NAMDeputy General Director

(See “Board of Management” for details about Mr. Tran Ngoc Nam)

MR. NGUYEN VAN SUDeputy General Director

Year of birth 1966


Qualification Mechanical Engineer, Master degree in Business Administration



Working experiences

1997 – 2001 Head of Technical Department, Petrolimex Lubricant Corporation, currently Petrolimex Petrochemical Corporation

2001 – 2005 BOM member (specialized) cum General Director of PTN Chemicals Co., Ltd.

2005 – 2008 Head of Corporate Development Department, Vietnam National Petroleum Corporation

2008 – 2017 Chief of Office, Vietnam National Petroleum Group

2017 – present Deputy General Director of Vietnam National Petroleum Group


BOM Deputy Chairman, Castrol – BP Petco Limited Liability Company

BOM member, Military Petrochemical JSC

MR. NGUYEN QUANG DUNGDeputy General Director

Year of birth 1972


Qualification Master degree in Chemical Engineering

Politic qualification Bachelor


Working experiences

1996 – 2005 Deputy Head of Petroleum Engineering Department, Vietnam National Petroleum Corporation

2005 – 2006 General Director of PTN Chemicals Co., Ltd.

2006 – 2009 BOM member, General Director of PTN Chemicals Co., Ltd.

2009 – 2012 Head of Corporate Development Department, Vietnam National Petroleum Corporation

2012 – 2017 Head of Strategy and Investment Department, Vietnam National Petroleum Group



BOM member, Petrolimex Gas Corporation – JSC


BOARD OF GENERAL DIRECTORS (continued)

MR. DAO NAM HAIDeputy General Director

Year of birth 1974


Qualification Master degree in Business Administration, Master degree in Law



Working experiences

2001 – 2005 Head of Market and Operations Management Department cum Assistant of General Director, cum Director of PJICO Lang Son Branch (from 03 February 2005)

2005 – 2009 Deputy General Director of Petrolimex Insurance Corporation

2009 – 2013 BOM member, Deputy General Director of Petrolimex Insurance Corporation

2013 – 2017 BOM member cum General Director of Petrolimex Insurance Corporation (PJICO)

2017 – present Deputy General Director of Vietnam National Petroleum Group cum General Director of Petrolimex Insurance Corporation (PJICO)


MR. NGUYEN XUAN HUNGDeputy General Director

Year of birth 1965


Qualification Engineer of Transport Economics



Working experiences

2012 – 2018 Head of Import-Export Department, Vietnam National Petroleum Group



Chairman of the Board of Members, Van Phong Bonded Petroleum Terminal Joint Venture Co., Ltd.

MR. NGUYEN BA TUNGChief Accountant

Year of birth 1972


Qualification Bachelor Degree in Finance - Credit



Working experiences

2008 – 2018 Head of Finance Department – Finance and Accounting Division, Vietnam National Petroleum Group

2018 – 2019 Head of General Office – Finance and Accounting Division, Vietnam National Petroleum Group

2019 – present Chief Accountant of Vietnam National Petroleum Group


Supervisor of Petrolimex Nam Dinh Co., Ltd. and Petrolimex Quang Ninh One Member Co., Ltd.

MR. LUU VAN TUYENDeputy General Director

Year of birth 1969


Qualification Master degree in Economics, Bachelor degree in Accounting



Working experiences

2002 – 2008 Member of Supervisory Board, Vietnam National Petroleum Group

2008 – 2012 Head of General Office under Finance and Accounting Center, Vietnam National Petroleum Corporation

2012 – 2019 Chief Accountant of Vietnam National Petroleum Group



BOM member, Petrolimex Group Commercial Joint Stock Bank (PGBank)


SUPERVISORY BOARD

MR. DINH VIET TIEN (retired from 01 April 2020)Head of Supervisory Board

Year of birth 1960


Qualification Bachelor of Finance and Accounting



Current position Head of the Group’s Supervisory Board

Working experiences

1996 – 2000 Head of Finance and Accounting Department of Petroleum and Gasoline Construction Design Company - Vietnam National Petroleum Corporation

2000 (September) Deputy Head of Accounting Department, Vietnam National Petroleum Corporation

2002 – 2008 Deputy Head of Inspection and Legal Department, Vietnam National Petroleum Corporation

2008 – 2014 Member of Supervisory Board, Vietnam National Petroleum Group

2014 – 01/04/2020 Head of Supervisory Board, Vietnam National Petroleum Group

MR. NGUYEN VINH THANHSupervisor

Year of birth 1963


Qualification Master degree in Labor Economics



Current position Supervisor of Vietnam National Petroleum Group

Working experiences

2006 – 2008 Deputy Head of Party Committee Organization Department, Vietnam National Petroleum Corporation

2008 – present Supervisor of Vietnam National Petroleum Group

Positions in other organizations: Supervisor of Petrolimex Quang Ninh One Member Limited Company and Petrolimex Da Nang One Member Limited Company

MS. PHAM THI DUNGSupervisor

Year of birth 1972


Qualification Bachelor of Accounting



Current position The Group’s supervisor

Working experiences

2003 – 2007 Head of Finance and Accounting Department of Petroleum and Mechanical Services Enterprise under Petrolimex Hanoi One Member Limited Company

2008 – 2012 Specialist of Finance and Accounting Division, Vietnam National Petroleum Group

2013 – 2017 Deputy Head of Inspection and Legal Department, Vietnam National Petroleum Group

2018 – present The Group’s supervisor

Positions in other organizations: Supervisors at Petrolimex Da Nang One Member Limited Company, Petrolimex Tien Giang One Member Limited Company and Petrolimex Transportation Services Corporation.

MS. HOANG MAI NINHSupervisor

Year of birth 1978


Qualification Master degree in Economic Management




Working experiences

2009 – 2015 Chief Accountant of Petrolimex Ha Giang Limited Company

2015 – 2018 Deputy Director of Petrolimex Ha Giang Limited Company

2018 – present Supervisor of Vietnam National Petroleum Group

Positions in other organizations: Supervisor of Petrolimex Binh Dinh Limited Company and Petrolimex Quang Ngai One Member Limited Company.

MR. TONG VAN HAISupervisor

Year of birth 1980


Qualification Master degree in Business Administration

Politic qualification Intermediate



Working experiences

2005 – 2006 Specialist of Finance and Accounting Department, Petrolimex Petrochemical Corporation – JSC

2006 – 2016 Worked at PTN Chemicals Co., Ltd.

2009 – 2016 Supervisor of Petrolimex Petrochemical Corporation – JSC

2016 – present The Group’s supervisor


Head of Supervisory Board, PTN Chemicals Co., Ltd.

Head of Supervisory Board, Van Phong Terminal

Supervisor of Petrolimex Petrochemical Corporation – JSC


AWARDS AND RECOGNITIONS

TOP TOP

VIETNAM’S BEST LISTED COMPANIES

VIETNAM’S MOST VALUABLE BRANDS

50 10

INDIVIDUAL AWARDS

» The Second-Class Labor Order awarded to the Deputy General Directors in 2018

» The Third-Class Labor Order awarded to the Deputy General Directors in 2019

» Certificate of Merit from the Prime Minister awarded to Mr. Le Van Huong - a BOM member in 2018

» Certificate of Merit from the Prime Minister awarded to the BOM Chairman in 2008 and 2016

» The Second-Class Labor Order awarded to the BOM Chairman in 2015

» The Third-Class Labor Order awarded to the BOM Chairman in 2011

» National emulation officer awarded to the BOM Chairman in 2009

» Certificate of Merit from the Prime Minister awarded to the General Director in 2014GROUP AWARDS

» The First-Class Independence Order in 2015, 2016

» The Second-Class Labor Order in 2009

» Ho Chi Minh Order in 2006

» Labor Hero Period Renewal in 2005

» Hero of the People’s Armed Forces in 2006

» Certificate of Merit from the Prime Minister in 2011, 2014

» In 2019, Petrolimex was honored by Forbes Vietnam in two categories:

• The third consecutive time winning the Champion of revenue in the “Top 50 Vietnam’s Best Listed Companies”;

• In the Top 20 Vietnam’s brands worth over USD 100 million and leading the retail industry in the “Top 50 Leading Brands in 2019”.

» In 2019, Petrolimex was ranked as one of the “Top 10 Vietnam’s Most Valuable Brands” by Brand Finance (UK).




DEVELOPMENT STRATEGIES

02 Petrolimex’s digital transformation story SWOT analysis Growth drivers Development orientation

PETROLIMEX’S DIGITAL TRANSFORMATION STORY

As a leading corporation in Vietnamese petroleum industry, Petrolimex considers IT as a key factor throughout its operations and a decisive element for the competitive advantages in new era. By choosing the theme “Digital transformation - Distinction drives us forward” for the Annual Report 2019, Petrolimex again affirms the importance and essential role of IT system on our sustainable development journey.

Determining the essential role of IT system in business operation and management, Petrolimex has pursued the digital transformation strategy since the 2000s. However, the digital transformation process actually began in 2010 and has had breakthrough developments since 2012 when Petrolimex had an initial public offering (IPO) and became a public company.

Its evolution has helped Petrolimex to gradually standardize management process in a modern way, implement and apply the world’s most advanced management solutions. Additionally, Petrolimex’s professional and technical employees were trained and transferred technology, ready to meet requirements of proactively receiving

and mastering technology, managing operations and effectively using the IT system invested according to the digital transformation strategy.

Throughout many years of information technology application, Petrolimex has gained a number of notable achievements in its digital transformation, typically: Receiving and processing information in timely, accurate and reliable manner; meeting the requirements of information provision in accordance with regulations of public companies and government agencies; saving time and cost, improving labor productivity; increasing competitiveness and customer satisfaction.

MANY IT APPLICATIONS ARE DEPLOYED AND CONSTANTLY IMPROVED

The following are some typical applications:

ENTERPRISE RESOURCE PLANNING (ERP SAP)

Petrolimex has deployed SAP since 2009 and officially went live across the Group on 01 January 2013. This system facilitates the business operation and management from the Group’s Parent company to 43 member companies, branches, enterprises, warehouses and oil terminal under petroleum companies (76 Company Codes). SAP system consists of management operations from purchase, storage to sales, accounting, statistics, financial reports, management reports and consolidation of reports all over the Group, etc. ERP SAP is integrated with an automation system, contributing to ensure the accuracy, safety and reliability in the petroleum delivery and loss management. Since the implementation of ERP SAP system, Petrolimex has always accomplished the consolidated reports throughout the Group, and satisfied the requirements of prompt and accurate provision of information on business performance not only for internal control purposes but also for external parties’ needs including government agencies and investors.


PETROLIMEX’S DIGITAL TRANSFORMATION STORY (continued)

MANY IT APPLICATIONS ARE DEPLOYED AND CONSTANTLY IMPROVED (continued)

ENTERPRISE RESOURCE PLANNING (ERP SAP) (continued)

For further improvement in the efficiency of IT system application all over the Group, Petrolimex constantly conducted researches, implemented new features and development modules on SAP system and achieved positive results in a lot of aspects:

ELECTRONIC INVOICING SYSTEM

(E-INVOICE)CASHLESS PAYMENT

APPLICATION

ELECTRONIC INFORMATION PAGE

ONLINE CONNECTION APPLICATIONS

ENTERPRISE RESOURCE PLANNING (ERP SAP)

DOCUMENT MANAGEMENT

SYSTEM (E-OFFICE)

The Group consolidated financial statements: The SAP system has enabled to simplify the consolidation of the Group financial statements, and timely provide information on business performance in accordance with the regulations. It is considered that Petrolimex is the first State-owned enterprise to consolidate the financial statements on its IT system.

Sales Management Online (SMO): Successfully pilot implemented in Petrolimex Sai Gon One Member Limited Company, SMO enabled customers to make direct orders on application website of the Company instead of the traditional method of ordering: phone, fax, email, etc.

Loss management at warehouses: The application of the program helped the Group and its units minimize much effort in the collection and calculation of loss data at stages, so that the data could be aggregated right after reviewing and confirming data at warehouses.

Customer management: This facilitates the collection and storage of a lot of important data and information about customers. Based on such data, the Group could easily give assessments and analyses on customer development trends as well as develop appropriate customer service policies and strategies.

Planning: Plans on costs, revenue, output, etc. are drawn up from the Group’s Parent company to member units, branches and enterprises in order to fully support in the management and operation of business plans, and control the progress at units.

RETAIL GAS STATION MANAGEMENT SYSTEM (EGAS)

ELECTRONIC MAIL SYSTEM



MANY IT APPLICATIONS ARE DEPLOYED AND CONSTANTLY IMPROVED (continued)

EGAS enables the Group to conduct effective management and operation of more than 2,700 gas stations owned by the Group, including retail sales to customers. The system is integrated with pumps for the accuracy, transparency and reliability of sales data to customers.

RETAIL GAS STATION MANAGEMENT SYSTEM (EGAS)

Electronic information page is an official portal of Petrolimex, serving communication and information dissemination for customers and partners, meeting requirements of information transparency as stipulated by government agencies including the regulations on petroleum transparency under Decree 83 and information publication for public companies by State Securities Commission.

ELECTRONIC INFORMATION PAGE (Website:

www.petrolimex.com.vn)

The Group is cooperating with banks to implement a cashless payment application for purchase at Petrolimex petroleum stations. This application enables customers to save time and effort when purchasing petrol and is a useful tool in the management of their petrol costs, helping Petrolimex identify, manage and take care of customers regularly.

CASHLESS PAYMENT APPLICATION

The Group has deployed and used software to support remote working, team work, online working via technological devices such as: computers, mobile phones, etc. These software enable staff to exchange, discuss and coordinate to solve their work quickly and effectively; simultaneously contributes to cost reduction of business trips, communication and transaction, etc.

ONLINE CONNECTION APPLICATIONS

E-INVOICE has been deployed and put into use since 2018; meeting the requirements of invoice digitalization, helping management of an average of 23 million e-invoices per year, making it available for customers’ actual demands on issuance, storage and search of electronic invoices, ensuring the transparency of sales invoices, and improving the convenience for customers.

ELECTRONIC INVOICING SYSTEM

(E-INVOICE)

E-OFFICE has been implemented and put into use since 2017; satisfying the requirements of digitalization for incoming and outgoing documents, and connection management of direction and operation documents from the Group to all member units. The system also facilitates the management of an average of more than 200,000 electronic documents per year, and becomes available to fulfill the requirements according to the electronic document management process: from issuing/receiving, processing, storing to searching, making statistics in accordance with the actual demands of business direction and operation.

DOCUMENT MANAGEMENT SYSTEM (E-OFFICE)

EFFECTIVE MANAGEMENT AND OPERATION

MANAGEMENT OF AN AVERAGE OF

MANAGEMENT OF AN AVERAGE OF

GAS STATIONS

E-INVOICES PER YEAR

ELECTRONIC DOCUMENTS PER YEAR

>2,700

Electronic mail system assists the management of over 250,000 e-mails per day, and readily meets the demands to support high-speed, timely and efficient information exchange inside the Group or with partners and customers.

ELECTRONIC MAIL SYSTEM (Email:@petrolimex.com.vn)

MANAGEMENT OF OVER

E-MAILS PER DAY

250,000

23,000,000

200,000


2020 AND THE FOLLOWING YEARS - SERVICE DIGITIZATION FOR IMPROVEMENT IN EFFICIENCY AND CONVENIENCE

In addition, to fulfill requirements of business governance and management of all leaders, managers, sales executives, and customers, Petrolimex keeps strengthening the implementation of digital transformation strategy by a number of key projects such as deployment of decision supporting system, management and administration of business intelligence (BI) and big data, additional provision of utilities in petroleum purchase and payment through modern methods such as automated sales, card payment, mobile payment, loyalty programs, customer appreciation, etc.

In 2020, Petrolimex keeps implementing a number of critical technological solutions to meet management and governance requirements throughout the Group, and also constantly researches to improve IT system as a foundation for the Group’s development in the following years. Specifically, the Group focuses on investment and development of the following programs, projects and applications:

In general, the investment in IT construction and development at Petrolimex has made great progress. In order to achieve those important initial results, the Group has persistently made great efforts to overcome many difficulties in the process of deploying technology applications, namely: unsynchronized technical facilities and non-standardized process lead to take a lot of effort and time to deploy, change user habits, give training for user, manage risks for newly-launched system, resulting in unstable operation, problems, technical failures, etc.

With a solid IT platform, Petrolimex continues to consolidate and focus on IT investment and development according to the digital transformation strategy set and conducted for the last years. At the same time, the Group will maintain the vital role of IT system in business management and governance, helping the Group carry out and reach the business targets and strategies in 2020 and the next years.

Integrate SAP program with smart devices or websites so that the production management tasks can be processed at any time and place, gradually reduce the space and time limits for management levels in interacting with the SAP system.

Determining the important role of IT in the global development context, Petrolimex continues to implement the digital transformation strategy, and accelerate application process of the world’s scientific and technological advances and achievements of the Industry 4.0 revolution into governance and management of petroleum business in the entire system.

Deploy modules of land, properties, plants and equipment management (PM: Plant maintenance) that manage detailed information about maintenance process, functioning conditions of assets recorded on the SAP system. On that basis, the member companies can be proactive in periodic repair plans.

Upgrade digitalization program for documents, records on e-Office system.

Upgrade the application system supporting remote working, online working and webinars to save the costs of business operation and governance.

Invest in research and implementation of new programs in order to supplement modern tools so that customers have more utilities and experiences when purchasing and paying for petrol.



» The Petrolimex brand is well known in both the domestic and international market with over 64 years of experience in trading petroleum. In 2019, Petrolimex was ranked as one of the “Vietnam’s Top 10 Most Valuable Brands” by Brand Finance.

» Owning the largest technical infrastructure among the petroleum key traders in Vietnam with the modern and synchronous level up to the regional standards, including the terminal and storage system with a capacity up to 2,200,000 m3; pumping technology system, conveyance, distribution, measurement; more than 570 km of petroleum pipeline; etc.

» Especially, Petrolimex has an unrivalled distribution system of 5,500 retail locations nationwide, in which, there are about 2,700 COCO petroleum stations that have been invested and built for the last 64 years. All of these stations are located at commercially favorable locations and gain turnover much more than that of other social stations thanks to their brand reputation. With income from difference between purchase price and sale price as well as impacts from general market mechanism, the system of these stations has brought the highest profit to the enterprise.

» Large-scale operation of the Group with its subsidiaries, joint ventures, associates operating in the petroleum business and the related/ supporting business, contributes to the Group’s advantages in capital mobilization and investment for large projects.

» Petrolimex’s strategic partner is JXTG Nippon Oil and Energy Corporation – No. 1 energy Corporation of Japan with over 100 years of experience, always accompanying and assisting Petrolimex in corporate governance improvement.

» Decree No. 83/2014/ND-CP, promulgated and officially took effect on 01 November 2014, helped enterprises trading petroleum, including the Vietnam National Petroleum Group, to be more flexible in adjusting the petroleum price in the country. Specifically, due to the mechanism dictating that two consecutive price adjustments must be least 15 days apart should price be increased, domestic petrolem prices are more closely aligned with the world’s, minimizing the risks from selling price’s being lower than the purchasing price due to that domestic prices was not adjusted timely enough to the world’s as before. However, petroleum is under the State’s price stabilization initiative; the petroleum price is not determined by the market forces due to that State control petrol price to achieve other macro targets. Although the petroleum price has been adjusted in line with the fluctuation of world’s, the degree of adjustment of domestic price may not correspond to that of world’s, partially affecting the Group’s business.

STRENGTHS (S) WEAKNESSES (W)

SWOT ANALYSIS


THREATS (T)

THREATS (T) (continued)

» The ever more competitive environment due to the attractiveness of the market leads to many potential threats to petroleum enterprises in the form of the entrance of new domestic businesses and the expansion of established international companies. In addition to the increase in the number of wholesale im/exporters, the year 2015 marked the establishment of petrol and oil distributors as stipulated in Decree No. 83/2014/ND-CP. Up to now, there have been more than 30 importers and 100 petroleum distributors in the domestic petroleum market, competing against one another and competing directly with petroleum exporters and importers in terms of Petroleum retail price.

SWOT ANALYSIS (continued)

» In early 2020, the novel respiratory syndrome coronavirus (Covid-19) originated in Wuhan, China, then broken out and spread across the world at a breakneck speed, affecting not only China but also many countries in the world. In March 2020, the World Health Organization (WHO) officially declared the Covid-19 outbreak a global pandemic. Governments forced to issue travel restrictions and lockdown measures. Plenty of international flights were limited or even banned, leading to a 40% -80% reduction in international flight revenue of airlines worldwide. In general, the world economy was enormously influenced by this pandemic. Many economists have been concerned that the world is on the verge of a global recession and in fact their concerns has actually been proved. According to a report by Bloomberg, in mid-March 2020, China - the world’s second-largest economy and the origin of the Covid-19 pandemic - officially published some data of the first two months in 2020 showing a comprehensive recession in the fields of industrial production (-13.5%), property investment (-24.5%) and retail business (-20%) for the first time in the past decade. Japan, Germany, France and Italy had even gone into economic slowdown and depression before the Covid-19 outbreak (for example, GDP growth rate of Germany and the UK reached 0% in the fourth quarter of 2019). According to reports by Reuters and New York Times, the global stock market witnessed the biggest plunges in the context of constantly increasing Covid-19 infection. On 12 March 2020, all leading stock exchanges in the United States were reported the worst record decrease (for example, the Dow Jones Industrial index declined by ~10%, the S&P 500 index fell by ~ 9.5%) in the US stock market in three past decades since Black Monday (1987) when the US stock market dropped more than 20% in only one trading session. Coping with risk of global economic recession increasingly apparent, the debate of world economic experts has gradually turned to the topic of how long this global economic recession will last and the extent of its impact. Despite not being affected as heavily as the tourism industry, the petroleum trading also faced the common challenges of the global economic depression due to reduced travel demands leading to significant decrease in petroleum consumption. However, opportunities still exist and require the Group’s Management to make accurate judgments to grasp. The Federal Reserve Bank of Cleveland researchers published a really interesting finding that there is usually a period of robust growth after each severe recession (for example, the 2008-2009 recession). (Source: Bloomberg).

» In addition to challenges from the risk of global recession, the petroleum trading in particular and the oil and gas industry in general still face another significant challenge that is the volatility of the world’s crude oil price. The WTI crude oil price at the end of the fourth quarter of 2019 tended to increase slightly from USD 55/barrel to USD 63/barrel. However, it dropped sharply again right from the beginning of the first quarter of 2020. In January 2020, geopolitical issues and reduction in oil demand caused the WTI crude oil price to fall from USD 63/barrel to USD 50/barrel. While oil demand tended to decrease sharply due to the impact of the Covid-19 pandemic, the failure of Saudi Arabia and Russia to reach an agreement on oil production ignited a price war causing steep fall in oil prices, sometimes down to USD 20.5/barrel on 18 March 2020. The volatile fluctuation of oil prices has had a great impact on the input prices of petroleum traders, posed a great challenge for the Board of General Directors in the management of oil price risks as well as the enhancement in inventory management efficiency. The rational decisions from the Board of General Directors are the keys to the Group’s stability and development in the future.

» Demand for petroleum consumption continues to grow along with the growth of the Vietnamese economy. Vietnam’s GDP is forecasted to grow at 6-7%/year in 2020. This demonstrates the steady growth of petroleum business. According to official reports, Vietnam’s market has high petroleum demands because per capita income rapidly increases while petroleum consumption per capita is low in comparison with the region (Source: World Bank). In addition, Vietnam is also a country with a fast growth rate of the number of vehicles in circulation. The compound annual growth rate (CAGR) of passenger cars is expected to reach 22.6% in the period of 2020-2025 and keeps reaching 18.5% in the period of 2025-2035. In addition to the rapid economic growth, the tourism and service sectors also have good growth, speeding up demands for logistics, transportation and traveling, leading to the increasing demand for petroleum. Therefore, the growth potential of the petroleum business is still promising in the near future, which is an opportunity for petroleum trading enterprises, including Vietnam National Petroleum Group, to increase their market share.

» Drastic encouragement and direction by the Board of General Directors for the process of digital transformation, application of advanced science and technology to facilities and business management and administration system gives the Group a new vitality and a great source of motivation for the Group’s sustainable growth in the 4.0 era. 10 years ago, Vietnam National Petroleum Group was one of the first State-owned enterprises to deploy the SAP ERP, facilitating automation, reduction in headcounts, and improvement in productivity and corporate governance efficiency. In addition, in the field of petroleum business in Vietnam, the Group is also a pioneer in successful research, application and implementation of “Vaporation Recovery Unit” (VRU) of Duc Giang Oil Terminal under Petrolimex Hanoi One Member Limited Company. Duc Giang Oil Terminal has the greatest frequency of petroleum input and output in the North (the average output of 4,000 m³ petroleum each day) with hundreds of xitec trucks coming. After operating VRU, vaporation wastage has been reduced, contributing to environmental protection on the one hand, and bringing significant economic efficiency to the Group on the other hand. After the successful operation of the VRU system at Duc Giang Oil Terminal, the Group has planned to carry out researches and deployment in a wide range of large terminals under the Group all over the country, expected to help further minimize the petroleum loss rate and improve business efficiency for the Group in the future. Recognizing the importance of science and technology, the Board of General Directors has introduced a number of strategic guidelines, directed all member companies of the Group to get involved in the digital transformation process, considered science and technology as a powerful tool to achieve mid-term and long-term development goals in the future.

[Refer to “Proposed plan for 2020” in the section “Report and Evaluation By Board of General Directors” (page 84) for more details in digital technology development plans and strategies.]

OPPORTUNITIES (O)


GROWTH DRIVERS

The Board of Management acknowledge that 2020 will be a difficult and challenging year for the Group due to a lot of changes regarding petroleum trading policies, global economic uncertainties and increasing competition. In order to overcome these challenges and achieve its goals of sustainable development, the Group must ensure growth momentum by integrating innovation and creativity into traditional development measures, including the following eight group of major issues:

2019 was a very difficult year for petroleum trading, but also a year of success in the governance and management of the Group’s Board of General Directors with actual results exceeding most of the 2019 business plan targets set by the GMS as well as the direction of the Board of General Directors. The above achievements have not only to strengthened the confidence from the Government, shareholders and investors in the Group’s Board of Management, Board of General Directors, but also enhanced the reputation of Petrolimex among partners on the local and international market.

Keep promoting the achievements obtained in 2019 on the basis of ensuring absolute safety in production and business operations as the top priority.

Regarding application of science and technology

Regarding the development of non-petroleum value-added services

Regarding research and development of new energy products

Regarding cost reduction

Regarding professionalization of investor relations activities

Regarding corporate restructuring and innovation

Regarding Petrolimex’s people

Regarding principal business activities

Concentrate on research and completion of evaluation on business models and plans as well as select appropriate partners to develop value-added services at Petrolimex’s petroleum stations. This project needs to be drastically implemented and piloted soon in 2020, and then proceeded to apply synchronously across the whole system to take full advantage of the Group’s retail chain nationwide in the future, thereby increasing the business efficiency and profitability of the whole Group.

Proactively and thoroughly implement the cost reduction throughout the Group’s system. Considering 2020 as a difficult year, the entire Group need to raise the awareness and attitude of frugality. Cost reduction should be conducted in all stages from analysis, evaluation and development of efficient sourcing, technology application to optimal loss management, expenditure reduction to further review and re-evaluation of property and land management to avoid waste and loss.

Maintain strengthening the restructuring of the enterprise and all member companies to increase business efficiency, finish divestment of non-core businesses, recover the Group’s investment capital in inefficient investment areas and business lines that are not conforming to the Group’s development orientation, and complete sound restructuring of Corporations under the direction of the Government.

Further strengthen research, investment and application of science and technology to production and business process for improved labor productivity and economic efficiency. Additionally, it is predicted that in the next 5 years, the digital economy scale gains 20% GDP of Vietnam. Therefore, the application of digital technology, big data and artificial intelligence need to be focused to enhance customer service quality and business efficiency.

Consolidate and strengthen the cooperation with experienced partners such as the Group’s strategic partner as JXTG or other energy corporations all over the world to jointly find out opportunities for investment, extraction and development of brand new energy products. The Group keeps conducting required procedures to accelerate the deployment of LNG project in My Giang, Khanh Hoa with EVN.

Petrolimex is already a large-scale listed public company with diverse shareholder structure and participation of nearly 100 foreign institutions including a lot of the world’s multi-disciplinary corporations and financial institutions. Therefore, the investors relations should be paid more attention. The information publication and provision to investors should present professionalism, transparency and timeliness. These indirectly preserve and develop the Group’s value through its share value on stock exchanges as well as its objectives of divesting State Capital and selling treasury stocks.

In the new decade, the strong development of science and technology has resulted in rapid changes in business methodology and environment as well as created a fierce competition on the market. Therefore, Petrolimex’s leaders and staff are required to constantly change their mindsets and frequently update their technical knowledge, regulations, economics and society, and more importantly, they should have ambition and aspiration to change Petrolimex in a more positive and dynamic manner. All system need to make progresses, create new innovations, take decisive actions and work with a high sense of responsibility.


4152637

DEVELOPMENT ORIENTATION

KEY TARGETS OF THE GROUP

Become a Vietnam’s leading energy group whose key business line is petroleum trading with focus on multi-ownership, investment and development of relating and supporting business segments for petroleum trading.

Successfully complete missions including profitable business results, increased values for shareholders and excellently complete political missions assigned by the State, ensure energy security assurance and act as the State’s macroeconomic stabilizer.

Maintain and sustain its position as the largest companies in Vietnamese market regarding petroleum downstream business, investment and development of liquefied gas fields (LPG, LNG, CNG), petrochemical, petroleum transportation, petroleum construction, insurance and other fields; rank among Vietnam’s Top 10 enterprises regarding business scale and business performance.

Improve business performance, increase revenue, reduce costs and earn high profit based on reform of organization, business methodology, systematic management and operation mechanisms, improvement of technical and technological capacity and human resource’s competence regarding quantity and quality (in-depth development), appropriate market organization and effective management of business operations.

Reform organization, business methodology, management and administration mechanisms; improve technical and technological capacity and human resource’s competence regarding quantity and quality; appropriately organize markets and effectively manage business operations. Improve business performance, maintain and ensure stable profit growth; guarantee income and employment for employees.

Successfully play the role of the key enterprise in balancing supply and demand and ensuring petroleum supply in conformity with demand for economic development and the country’s industrialization and modernization and high-performance business as well.

Choose key and profitable investment projects, focus on maximal utilization of existing technical facilities; Foster investment and development of retail network with commercial comparative advantages, follow up the development trend of IT to have full application in operations.


PRODUCT DEVELOPMENT STRATEGY

» Research, develop terminal project to receive and provide liquefied natural gas (LNG) to combined-cycle gas-turbine thermal power plants in Van Phong Economic Zone, Ninh Hoa District, Khanh Hoa Province (LNG terminal project in My Giang).

» The LNG terminal project in My Giang with capacity of about 6 million tons/year is planned to receive LNG importing vessels with a capacity of up to 260,000 m³, and includes a gas recycling system to supply LNG to My Giang Power Center (invested by Vietnam Electricity Corporation) with a capacity of 6,000 MW and containing 4 power plants with the LNG consumption of over 17,000 tons/day. The LNG terminal project in My Giang and My Giang Power Center are expected to put into no-load commission in the fourth quarter of 2025.

DEVELOPMENT ORIENTATION (continued)

MID-TERM AND LONG-TERM DEVELOPMENT STRATEGIES

INVESTMENT STRATEGY

» Look for a comprehensive solution to improve operations in subordinate units with petroleum station network, for example: renewal in organizational model, business methodology, internal control mechanism, technological and technical innovation, improvements in human resources and market capture, etc.

» Seek and take advantages of a wide range of value-added utilities of petroleum station chain such as: self-service, lubricant charging services, car wash, supermarkets, restaurants, services supporting financial payment, banking, etc.

» Comprehensively evaluate the efficiency of using investment capital and assets of the Group and units; strengthen further the management of investment in other businesses; aggregate its resources for investment and business in core business with comparative advantages.

EXPECTED CAPACITY OF LNG TERMINAL PROJECT

IN MY GIANG

MILLION TONS PER YEAR

06

ENGINEERING AND TECHNOLOGY STRATEGY

» Focus on modernizing technical facilities of terminals, reservoirs, pipelines, petroleum station network and petroleum transporting vehicles in a orientation of standardization and unification throughout the industry. Invest in new construction of petroleum projects to stabilize capacity, ensure the sourcing and reserve of goods.

» Innovate and apply IT to business performance progress to promptly fulfill and conform to the Industry 4.0 era.

PERSONNEL TRAINING STRATEGY

» Maintain and improve intermediate training courses for officers.

» Enhance skills and knowledge for employees and staff in the digital transformation period.


DEVELOPMENT ORIENTATION (continued)

ENVIRONMENTAL AND SOCIAL GOALS

ENVIRONMENTALLY FRIENDLY PRODUCTS STRATEGY

» Research and invest in technical facility system to develop new energy products which are environmentally friendly such as liquefied natural gas (LNG);

» Organize and put marine fuels into circulation and business in compliance with the Sulphur Cap Regulation of International Maritime Organization (IMO) from 01 January 2020;

» Also keep carrying out business of high-quality and environmentally friendly fuel products under the direction of the Government, for example, gasoline Ron95 Euro IV and diesel 0.001S Euro V.

The mission of a leading corporate in petroleum business industry is to make contributions to the country’s economy and development. Besides, Petrolimex is always aware of its role in contributing to society, community and environmental protection. The Board of Management have set out very specific strategies in order to achieve the Group’s sustainable development goals, which also emphasize the goals related to environmental and social responsibilities as follows:

PERSONNEL TRAINING STRATEGY

» Organize and deploy training programs for levels from managers of petroleum stations to mid-level managers and Master of Business Administration (MBA), etc.; at the same time, continue to implement domestic and foreign training courses on petroleum;

» Enhance skills and knowledge for employees and staff in the digital transformation period.

CORPORATE SOCIAL RESPONSIBILITY STRATEGY

» Maintain carrying out the Group’s plans on social security in the period 2018 – 2020; continue to commit the Group’s responsibilities and obligations to the local community where Petrolimex units directly get involved in operations at the requests of local authorities;

» Actively take part in programs of poverty reduction, donation for people suffering from natural disasters, donation for building homeless shelters and schools, etc. aiming at improvement of spiritual and material life for the community.

INVESTMENT STRATEGY

» Research and take advantages of a wide range of value-added utilities of petroleum station chain such as: self-service, lubricant charging services, convenience stores, services supporting financial payment, banking, etc.




BUSINESS PERFORMANCE

03 Report and evaluation by Board of Management Report and evaluation by Board of General Directors Business performance Organization and human resources Investment activities and project Implementation

Consolidated financial performance

Shareholders’ structure, owner’s equity changes

REPORT AND EVALUATION BY BOARD OF MANAGEMENT

EVALUATION ON THE BUSINESS OPERATION

EVALUATION ON THE BUSINESS PERFORMANCE

In 2019, Vietnam achieved GDP growth of 7.02%, the highest one in recent years, and the macroeconomic environment remained stable. The Ministry of Finance and the Ministry of Industry and Trade has maintained the management of petroleum price in compliance with Decree No. 83/2014/ND-CP and in line with the world oil price. The State agencies also have intensified their inspection, control, and anti-commercial fraud in petroleum trading. Besides, the Group’s business operations were also affected by a number of unfavorable factors, for example, scale and competition from other key traders; especially in the second quarter of 2019, the Ministry of Finance and the Ministry of Industry and Trade repeatedly adjusted rates of provision and use of Price Stabilization Fund (“PSF”) at a high level in many cycles resulting in many times of negative PSF balance and influencing the Group’s capital balance; unstable domestic petroleum supplies; three incidents in Nghi Son Refinery and Petrochemical LLC (24 February, early July, early September) negatively affected the Group’s sourcing.

The Group consistently and drastically implemented given solutions, followed market fluctuation and the State’s macroeconomic policies, promptly took appropriate and effective measures for each market area, each unit and each moment. Thanks to great efforts of the Group and member companies, 2019 business performances were relatively comprehensively reaching and exceeding the GMS’s target. Some main criteria:

EVALUATION ON THE ENVIRONMENTAL AND SOCIAL RESPONSIBILITIES

Petrolimex always strictly complies with the legal regulations on environmental protection, furthermore, proactively and synchronously implements solutions and methods of environmental protection management from the Group’s Parent company to member companies. The most prominent activities are: To pioneer in science - technology research, application and investment on environmental protection in petroleum works, specifically, fixed containment boom system, laser docking system, vapor recovery technology, etc.; To research alternative energy sources of gasoline; To select and supply high-standard and environmentally friendly fuel products such as RON 95 Euro IV, DO 0.001S Euro V and marine fuels in compliance with the Sulphur Cap Regulation of International Maritime Organization (IMO) from 01 January 2020. In 2019, in the whole Group there was no serious case of explosion, fire or environmental pollution, contributing to a stable environment for business operation and development, and none of units under the Group violated laws on environmental protection.

Petrolimex acknowledges that fulfilment of corporate social responsibilities (“CSR”) is both a duty and an opportunity for the Group to develop. With a nationwide operation network ranging to remote areas and disadvantaged areas, Petrolimex annually assigns plans for member units to actively coordinate with local

authorities to contribute to poverty reduction, quality improvements in education, health care, caring for families under preferential treatment policy and people with meritorious services to the revolution, etc. This enhances the engagement between the Group, member units and local communities.

From results in 2018, the Group established a CSR Department and issued the Regulation on Organization and Implementation of CSR with the goal of increasing operational specialization in 2019. As of the end of 2019, member units, on behalf of the Group, set aside VND 75.2 billion (increasing by 35% in comparison with that in 2018) from CSR fund for 2018 - 2020 period and other funds to fulfill Petrolimex’s responsibilities and obligations to communities of localities where member units directly do business and at request of local authorities. Typical social activities of the Group: support political and social organizations (Veteran Association, Association of Victims of Agent Orange), support to education and health care, supports to eradication of temporary shelters, poor households, “great unity” houses and charity houses, and supports to remediation of natural disasters’ consequences as well. Particularly, as a member of Social Fund of the Industry and Trade, the Group also participated in Vietnam’s Child Protection Fund and Vu A Dinh Scholarship Fund.The Group fully and promptly complied with resolutions of the GMS, BOM and regulations of the State.

TOTAL VOLUME OF PETROLEUM SOLD

MILLION M3 TONS

13.9equivalent to 113.6% of the plan

TOTAL CONSOLIDATED PROFITS BEFORE TAX

VND BILLION

5,648equivalent to 108% of the plan.

TOTAL CONSOLIDATED REVENUE

VND BILLION

189,604equivalent to 97.2% of the plan

FULFILL PETROLIMEX’S RESPONSIBILITIES AND

OBLIGATIONS TO COMMUNITIES

VND BILLION

75.2increasing by 35% in comparison with that

in 2018


REPORT AND EVALUATION BY BOARD OF MANAGEMENT (continued)

The General Director, Deputy General Directors and managers fully and seriously carried out the resolutions and decisions of the Board of Management. During the management, the General Director and members of the Board of General Directors complied with the decentralization specified in the Charter, the Group’s internal management regulations. The General Director promoted the leadership roles and responsibilities, directed and oriented the Group’s important and core issues, and effectively coordinated the activities of the Board of General Directors. The Deputy General Directors actively implemented and completed their assigned tasks.

The Board of General Directors took a lot of synchronous, drastic and timely business solutions/business supports according to the guidelines and orientations of the Board of Management and market developments. Furthermore, they also played a vital role in completing and exceeding important targets assigned by the GMS.

In general, the Board of General Directors successfully accomplished the Resolutions and Decisions of the GMS and the Board of Management with their high sense of responsibility and effectiveness in 2019.

EVALUATION ON THE BOARD OF GENERAL DIRECTORS’ ACTIVITIES THE BOARD OF MANAGEMENT’S ACTIVITIES IN 2019The Board of Management operates in accordance with the provisions of the Charter and the Law on Enterprises. Board meetings are conducted regularly, in accordance with the regulations. The Board of Management has followed closely the orientation agreed at the GMS and the actual situation of the Group to propose and implement resolutions. In addition to regular meetings, the BOM also collected written opinions of the BOM members for 72 times on issues within decision-making authority to direct, manage and regulate activities of the Group. Some main tasks:

» The Board of Management has led the Group effectively, preserving and raising equity, adding value to shareholders.

» The Board of Management organized the 2019 GMS under regulations.

» The Board of Management directed amendment, completion and issue of a set of internal control regulations suiting the new model of a listed company.

» The Board of Management closely, promptly and regularly coordinated with the Board of General Directors to direct and the Supervisory Board to control the implementation of resolutions of the GMS and Board of Management.

» All decision-making issues of the Board of Management are discussed in detail and timely announced to the Supervisory Board and the General Director in accordance with regulations.

» Proposals of the Board of General Directors are analyzed, discussed and given feedback in a timely manner.

» The Board of Management has directed the preparation of a business plan and other plans to submit to the GMS for approval.

» Approval of financial statements and evaluation of the results of business performance of subsidiaries and associates quarterly according to regulations.

In general, the Board of General Directors successfully accomplished the Resolutions and Decisions of the GMS and the Board of Management with their high sense of responsibility and effectiveness in 2019.

» The Board of Management has directed the staffing under their jurisdiction.

» The Board of Management has instructed to continue implementing the restructuring project of Vietnam National Petroleum Group in accordance with the regulations of the Government and the Committee for Management of State Capital at Enterprises.

» The Board of Management has drastically directed in investing, cost cutting, well structuring the market, revising the business mechanism to close

Documents

fs.petrolimex.com.vn€¦ · ABBREVIATIONS BOM Board of Management COCO Company Owned–Company Operated Co., Ltd Company Limited CRM Customer Relationship Management CSR Corporate