The FINANCIAL -- New diversified portfolio, acquisition of natural gas distribution companies, increased paid taxes to the state budget, corporate responsibility development, exploitation of a large terminal in West Georgia - Soso Pkhakadze, Chairman of the Wissol Board of Directors gives a detailed description of the company’s innovations and outlooks in 2007/2008 in conjunction with the global concern of growth prices on oil.
2007 has been a highly dynamic and efficient year for Wissol Petroleum Georgia. Our core business development was the major accent of last year. Moreover the company added several petrol stations in Tbilisi and throughout the whole country. Parallel to the developments, Wissol made a decision to diversify its activities.
The decision was conditioned by the following factors: 2007 was the year characterized by the highest prices on oil ever. Taking into consideration the environment, in order to maintain stable income and to some extent weaken the negative influence on the local market, Wissol decided to diversify its activities.
Our intention was to make Wissol a company including a wider sense of business rather than of a sole petrol filling station owner. That’s why we decided to expand in the gas direction as well. This year we have already opened several gas filling stations and made a strategic decision to further intensify works in this direction for the next year.
Gas is less dependent on the global price changes on oil that we face daily. In this case we have more fixed prices set and subsequently, the self-value of the product is rather less, cheaper by about half.
To give specific details, today 1 m3 gas costs GEL 0.75 whereas the lowest quality petrol price is GEL 1.50.
Hence, on the one hand we provide the diversification of gas and on the other hand- for the consumers who cannot afford to buy expensive products, we offer alternative cheaper means.
The segment of vehicles that run on gas is not big as it makes around 5-6% of the total amount. Besides, setting up a gas station requires more finances than a petrol station.
Considering the context, Wissol could provide a more interesting investment that would be of higher efficiency from an economic viewpoint. However we prefer to reduce the influence caused by the growth oil prices and diversify the company’s business portfolio for the sake of the market.
Wissol acquired natural gas distribution companies in Marneuli and Telavi regions and at this point we’re actively developing the manufactories that were previously state owned. Since the very first day we started implementing and carrying out our new business processes and did a complete modernization of the companies starting with the hire of brand new management. New management principles will enable us to make both companies a great success in the near future.
When a company is a success, it’s mutually beneficial for the latter as well as for the people and consumers it serves.
We promise that whenever Wissol enters the population of a region the gas distribution companies will have a permanent gas supply.
Wissol also has plans and in terms of starting operations at ports, that’s the third phase of the company’s diversification strategy. In the frame of the project we’re motivated to supply the ships entering and leaving Georgian borders.
So far the high prices on oil are regarded to be caused because of OPEC decisions or seasonal and different types of factors, no less important the political background in relation with the ongoing processes in the Middle East.
Though for the last 3-4 months experts claim the demand-supply balance evaluation. It means we have to face these fundamental problems and it will take a while to recover from the difficulties. A high growth demand on oil has been obvious over the last two years, which has been conditioned by the Chinese and Indian factors.
We have non-stop access to analytical information and so far there’s been no consistent pattern concerning oil prices worldwide, as for example in America, oil prices are even dropping. I stressed the U.S factor because it’s the state consuming 90.23% of oil worldwide. Hence, every single development as the demand structure, demand growth or decrease, all this has a great impact on the global price formation.
These are the arguments affecting Wissol’s decision to start diversifying its business. In general I would evaluate 2007 as an efficient year for us.
We’re happy to announce the creation of 500-600 new jobs annually. The figure will be further increased in 2008 as there are lots of new ongoing projects this year. By the end of 2008 and the beginning of 2009 we’ll have about 2 000 people employed at Wissol. Today the number of the company’s staff has exceeded 1 000.
Also very important are the projects that we implemented in the frame of the corporate responsibility direction.
In 2007 taxes paid by Wissol to the state budget were significantly increased. In 2006 Wissol paid GEL 43 million to the state budget whereas in 2008 we expect the figure to be as high as GEL 75-80 million, which is an impressive indicator.
In 2007 we started importing Italian oil in Georgia. One could not even think of providing high quality products to the local market before 2004 as 70% of the realised oil was contraband.
During the last 2-3 years the sector was legalized and hence, we set a strategic goal to make Wissol a company distinguished for offering high quality products. After months of negotiations we signed a several years’ contract with Italians, which was followed by immediate results in terms of growth product realisation. Today we import 2 tankers monthly from Italy.
The Wissol loyalty Pirveli Card has been another success at the company. The card offers our clients up to a 5% discount.
Our major principle is to maximize the consumer satisfaction level. We serve 30-35 000 people daily, that’s a great responsibility.
Wissol has an activated hotline which means that any person can call and express complaints to get taken care of at once.
Expected developments in 2008 is quite a serious topic of discussion. As far as we’re aware, there’s no significant drop of prices expected and the same policy will be maintained throughout 2008.
Still, we are striving to maintain low prices minding the company’s sources. As long as we have extra means, Wissol will make no correction to the price policy. The two terminals that we reconstructed this year will help us in this respect. The terminals will be activated in Samtredia, West Georgia, which is the biggest terminal in the country, excluding sea terminals.