Pumangol's retail strategy TEY_post_-Ivanilson-MACHADO

To keep our market share as high as it is, our main strategy today is to open new service stations within urban areas.


Pumangol’s retail strategy

November 28, 2023

Ivanilson Machado, CEO of Pumangol, talks to The Energy Year about the current state of the company’s retail business, the performance of its other main business lines and the future business opportunities it sees ahead. Sonangol-owned Pumangol is a downstream company active in petroleum product retail, storage and management.

Could you share with us Pumangol’s current position with respect to its retail business?
In 2023 we opened two new service stations, and we are planning to inaugurate at least two more by the end of 2024. Following the green light from our shareholders in 2022, we restarted investing in retail in Angola and exploring opportunities in other business lines as well.
Our position in the retail market is very strong, and in order to keep our market share as high as it is while facing increasing competition, our main strategy today is to open new service stations within urban areas, which is different to what we used to do in the past when our focus was to be present in every province.
Today, our main goal is to strengthen our presence in main cities of the provinces while paying particular attention to Luanda, where we want to reinforce our brand visibility. As part of our five-year plan, we will be focusing on opening new service stations but very strategic ones only, targeting at least four or five sites from 2024.
Construction costs were already significantly high, but now, due to the kwanza devaluation, investments have become more costly as most of the construction companies have to import materials, causing prices to increase even more.
Furthermore, given how expensive land plots are, especially in the capital, we are carefully reassessing all our investments, and we are already working on the plots for 2024. We want to open new sites only where we see a positive and consistent return for our investment and strengthening of our image and market share.

How would you assess Pumangol’s performance with regard to the company’s other main business lines?
The bitumen business, which includes the production and sales of emulsions, is going very well. Several construction companies are finalising projects, so they are buying bitumen. Throughout 2023, we have been importing more than we expected at our three terminals, Luanda, Lobito and Malanje.
Then, aviation is another segment that has been improving compared to 2022. During the pandemic, some companies left Angola, while others reduced their flights to cover just Luanda. It was a difficult time for us, and we had to recover, but now business is getting back on track and growing, with new companies coming in.
Although the situation is still lagging behind in the provinces, where in the past we made important investments to build the required infrastructure to support our operations, we are optimistic about our future in this segment. The Catumbela airport is supposed to welcome international flights as well, and the new airport in Luanda can definitely be an important asset to step up our aviation business and increase our jet fuel sales.


What opportunities do you see for Pumangol’s future business activities?
Lubricants is a business line which is performing positively, and it’s one we want to focus on more, in particular by entering the mining sector. We are already working with important mining players such as Catoca, and we’re supplying most of these players with fuel but not lubricants. Our goal is to obtain combined contracts under which we will provide them with both products, together with a vast array of services, such as storage.
In fact, the majority of the mines in Angola are located in remote areas, where transportation takes longer and downstream operations are more complex. Therefore, if these players can deploy their own storage capacity for lubes and fuel, it is a big advantage for them. We are investing to position ourselves down this line and penetrate into this sector while always keeping in mind that a key point for Pumangol is to provide clients with more than just products.
We are also looking at entering the gas distribution business for LPG, which we’ll begin with next year, most likely by taking advantage of our large network of 80 stations across the country. In Angola, there is a significant gap in this segment, which gets worse the further you go from Luanda. We are working on the logistics to fill that gap and evaluating how we could manage to distribute LPG outside Luanda.
The greatest challenge is reaching other provinces while making sure that we always have a stock of gas at all our petrol stations. We are not the only one distributing this product, but we want to do it differently to really make a difference by ensuring efficiency and reliability in both service and supply.
Furthermore, given that we have not developed any refilling plans so far, our operations will give this part of the business to other players too, such as Sonangol, which we will pay for refilling the bottles. At the beginning at least, our main business will be to distribute and sell the refilled bottles, with all other services being provided by a third party.
Then, if business takes off, we will invest more, given that we already have terminals and space to build our own refilling plant. Gas is going to play an increasing role in the domestic energy mix (for example, we will see more gas-fuelled generators), and its production is expected to rise, and we definitely see a potential opportunity here.

What are the main barriers preventing you from getting more into the bunkering business, and what solutions are you looking for?
The bunkering business is still challenging. We have all the conditions for doing it, but the market for bunkering is not an easy one. It is a very specific business; you have to be careful before jumping into it.
First of all, most clients want special conditions – for example, in terms of credit – without giving you any guarantees. Then, it is a segment with huge competition. We are considering sealing joint ventures with small local players that have, for instance, the vessels but not enough financial or storage capacity.
Bunkering is not a priority for us at the moment. Nonetheless, we are keen to explore opportunities and partnerships with SMEs operating in the sector who present valid options. Our strategy in this sense is to reduce the risks as much as we can because bunkering is a risky business for us, especially if international clients are involved. We can support small companies with our financial and storage capabilities while we leverage the greater flexibility these companies have when dealing with big players.

How important is human capital for Pumangol, and what are the company’s main CSR initiatives?
One of our biggest targets is to keep our company sustainable, and a paramount aspect for doing so is to invest in our people. Pumangol is 100% an Angolan company, and since we have left the Puma Energy Group, we have decided to allocate increasing resources for the development of our employees to make sure that our company will be stronger in the years to come.
To give you an example, we are investing significantly in our training academy, which is now certified to deliver training for non-Pumangol workers too, as we want to make the academy independent from the company.
Apart from the academy, we have been strongly committed to our social responsibility in the past years, linking our CSR approach to UN-established sustainable development goals. This is the reason why our initiatives focus on the environment, social inclusion and the development of human capital. In addition, we are working on initiatives such as opening child daycare schools in Benguela. We want to replicate the model in Luanda and other provinces.
We take into the highest consideration how our investments can have a positive impact on local communities’ welfare because we believe that social responsibility efforts are connected to our company’s growth, and we are working internally to build this vision and live our promise of energising communities.

What kind of impact do you think liberalisation is going to have on the Angolan economy and Pumangol’s activities?
Subsidies have started to be removed this year, and if the liberalisation process continues, you will see a different Pumangol in the next five years. I experienced the impact that liberalisation had on Puma Energy when I was CEO in Mozambique. The business changed completely. We started investing heavily to increase our storage capacity given that competitors did not have it, meaning they had to pay us to store their products. Our storage business skyrocketed.
Something similar can happen in Angola too: we already have the above-mentioned three terminals, and we can further expand our storage capacity. Moreover, there are not many players here with noteworthy storage capabilities, apart from Sonangol.
Then, besides curbing smuggling, liberalisation will allow us to see which companies can really grow. Now, you sell what you have. In the future, you will sell what you will be able to buy, and Pumangol is a company that decided to have a portfolio that deals with the full supply chain, from transport to storage. This, along with our well-known quality services, gives us a strategic advantage compared to our competitors, and liberalisation will definitely provide us with a framework to thrive even more.

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