The Impact of the Pandemic on the Petrol Group's Operations
Ljubljana, 2 April 2020 – At its 41st meeting held today, the Supervisory Board of Petrol d.d., Ljubljana was informed of the measures taken by the Management Board of Petrol d.d., Ljubljana as a result of the COVID-19 pandemic. It was also briefed on the sensitivity analysis of the consequences of the pandemic for the Petrol Group's operations. The Supervisory Board of Petrol d.d., Ljubljana is of the opinion that the Management Board of Petrol d.d., Ljubljana responded appropriately to the pandemic and has control of the situation in the current circumstances.
The world is facing a pandemic which also affects the operations of the Petrol Group. In January and February 2020, the operations in all of the Petrol Group's markets continued without disruption and according to plan. In March 2020, however, the business environment deteriorated considerably as the pandemic began. Petrol d.d., Ljubljana has been closely monitoring the situation since the outbreak of the epidemic. A coordination team has been set up which develops appropriate measures as regards the organisation of work and business continuity. Coordination teams have also been set up within subsidiaries. When developing measures and putting them into practice, the Petrol Group complies fully, in all of its markets, with the instructions issued by the authorities. Its primary concern are measures aimed at protecting the health of Petrol's customers and employees. The general public is informed of all measures as they are adopted. Apart from certain restrictions (reduced working hours at some service stations), there has been no disruption in the energy-product supply. Moreover, Petrol Group companies have in place action plans to continue to ensure uninterrupted energy-product supply should the situation deteriorate. The Petrol Group will adapt further measures to reflect the latest situation in all of its markets.
Operations in Croatia will certainly be affected also by the recent earthquake in Zagreb. Technical services have inspected the infrastructure at Petrol’s service stations, but no major damage was detected save for interrupted electricity and internet connections. All service stations in the affected area operate without disruptions.
The Petrol Group operates in two highly competitive industries – energy and trade. Besides trends in the area of energy and commerce, the Group's operations are subject to several other and often interdependent factors, in particular changes in energy product prices and the US dollar exchange rate, which are a reflection of global economic trends. In addition, operations in the Petrol Group's markets are influenced to an important extent by local economic conditions (economic growth, inflation rate, growth in consumption and manufacturing) and measures taken by governments to regulate prices and the energy market. The pandemic will have an impact on all of the above factors, which will be reflected in lower economic growth, consumption and production. The sectors that are currently most affected include aviation, public and individual transport, tourism and personal services. Due to a decline in demand, oil prices have also decreased significantly.
The Petrol Group has set ambitious goals for 2020. Already when drawing up the plan, the Petrol Group was aware of the possibility that despite careful preparation, informed business decisions, quick response to changes and an efficient risk management system external factors may arise in the business environment which are beyond its direct control and may pose a risk or a threat when it comes to meeting the targets. Because a natural disaster of such magnitude could not have been predicted, it is very likely that the Petrol Group will not meet its operating targets for the current year. The impact cannot be assessed reliably primarily because it is not known for how long the movement restrictions will be in place both in the Petrol Group's markets and in the neighbouring countries.
In response to the pandemic, the Petrol Group has developed several scenarios. With a multitude of unknown factors, both as concerns the duration of the pandemic and its actual impact on the economy, it is currently not possible to make more accurate predictions about the impact of the pandemic on operations in 2020. The Petrol Group has experienced a decline in the sale of both petroleum products and merchandise in all of its markets. The decline is most pronounced in Slovenia and Croatia, its two biggest markets. At certain service stations in Slovenia, the sales have even decreased by more than 50 percent since the pandemic was declared. Once the effects of the crisis can be quantified, Petrol d.d., Ljubljana will immediately inform the general public thereof.
The Petrol Group responded to the crisis in a comprehensive manner. All measures to ensure sufficient liquidity were launched immediately. Given the difficulty of the situation, cost streamlining and even more consistent cost management were implemented immediately. The investments to be made in 2020 were limited to the most urgent ones that are necessary to ensure smooth and secure operations. Particular attention was given to HR management, especially to ensuring sufficient staffing levels at the points of sale. Where possible, other employees work from home, and some were temporarily laid off due to a lower volume of business activity.
Ever since the pandemic began, the safety and health of the Petrol Group's employees and customers as well as reliable supply have always been placed first. In a very short period of time, cash desks at all service stations were equipped with protective screens, employees working at the points of sale were given protective equipment, the provision of certain services (the Fresh range, carwashes) where it is more likely that an infection can be passed on was suspended, and we also make sure, at every point-of-sale entrance, that the recommended number of customers who can be simultaneously present in a shop is maintained. We encourage the use of On the Go and mBills apps offering contactless payment functionality, and we also deliver items ordered from Petrol's online shop. As fresh food items offered at Petrol's Fresh corners were temporarily discontinued, the resulting food surpluses were given away to charities across Slovenia.
Already during the 2008 economic crisis, the Petrol Group proved that it is able to operate also in very demanding conditions, and it exited the crisis even stronger.
At the Petrol Group, we regularly keep up to date with all measures taken by authorities to support the economy.
In the coming weeks, the Petrol Group will closely monitor the behaviour of its customers and will adapt its range to reflect market conditions. Uninterrupted energy-product supply will be ensured in all markets.
Before the pandemic, the Petrol Group was in a very good business and financial condition. Owing to low debt, good liquidity, control of business processes from procurement and logistics to sales, and thanks to our motivated staff, we are confident that even in this situation we will be able to fulfil our mission of ensuring comprehensive energy-product supply.
At today's meeting, the members of the Supervisory Board of Petrol d.d., Ljubljana took a unanimous decision to waive 30 percent of their remuneration arising from the performance of their Supervisory Board and committee duties, effective from 1 March 2020 and up to and including the month in which the epidemic in Slovenia is declared over.