MOL Romania, the fourth local player on the segment of fuel distribution (in terms of size of filling station network) says the demand for fuel went down by more than 10% in the first half of the year compared with the same time of last year, with the most severe decline registered by the corporate segment. Under the circumstances, the company has rethought its entire business model, applying cost cuts across all segments.
"We have to forget about such things as how nice it would be if we had this and that and be quick about cutting costs. Now is a good time to renegotiate rents for instance, which we did starting from the plots where our filling stations are, to the office building where we operate. Of course the owners do not like it, but they agree to it because they prefer a contract with a good payer than take their chances," says Zsolt Szalay, country chairman of MOL Romania, a company with an over 590 million-euro business last year. This was not the only step Szalay has taken since the beginning of the year to cope on a market that is faced with a much steeper nosedive than initially expected.
"We cut power consumption either by carefully using it or by installing equipment that would allow it. I won’t mention advertising and travel costs, because everybody has them," MOL Romania’s official said.
However, MOL Romania has raised salaries and did not lay off people this year. "We will continue investments, but the expansion of the network depends on several things, with one of the important factors being the price of land," explains MOL Romania’s country chairman.
The company opened three petrol stations in the first half, following 4.5 million euros in investments, so that MOL Romania’s network currently comprises 135 filling stations.
Szalay says the demand for fuel went down by more than 10% on the corporate client segment in the first half of the year compared with the same time of 2008, with the decline on the individual customer segment being less serious than that.
"A year ago today we had one more product on the market, leaded petrol, which was gradually phased out. This could lead to certain distortions in terms of comparisons about the consumption trend in the first half, compared with last year. However, most losses are generated by the reduction of the transport, agriculture and industrial operations," Szalay explains.
He adds that it is difficult to estimate the trend of consumption for the second half of the year, using the trend of the barrel price last year as example.
"We are now beginning to feel an increase in fuel consumption, but this is normal considering the seasonal nature of demand given the increase in tourism operations, and is not necessarily a signal of us overcoming the crisis. Still, we might see a slight rebound by the end of the year, because prices are much lower, too. Last year, we saw demand drop because of higher pump prices as a result of the record prices of the petroleum barrel," Szalay says.
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