Aggressive market penetration bolsters Forte Oil profit

Forte Oil Plc, which owns a power plant and sells gasoline in Nigeria, had full year profit upturn amid an economic down turn in Africa’s most populous nation, thanks to an aggressive market penetration strategy.

This means the Nigerian downstream oil and gas giant has utilize the resources of shareholders to generate higher profit.

The 2016 audited financial statement of the firm showed operating profit increased by 10.83 percent to N9.62 billion from N8.68 billion as at December 2015.

Sales were up 19.25 percent to N148.60 billion as the company continues to use its marketing and focus strategy to increase its share of the market.

The downstream business is doing well. If you look at last year, while other gas stations were out of products, Forte Oil had because it draw from its upstream system. The company’s market penetration strategy worked, according to Dolapo Oni, head energy desk at Ecobank Plc

“Nigeria National Petroleum Corporation (NNPC) peer the company with an IOC to sell dollars. Volumes were very strong,” said Oni.

Petroleum fuel markers have enjoyed strong sales since Federal Government increased the price of Premium Motor Spirit (PMS) to N145 in May last year from N87 previously held.

Minister for the Minister of State for Petroleum Resources, Ibe Kachiukwu, assured that the new price regime would block the drain through which government loses N16.5 billion monthly.

Ending the subsidy payment will make the country a refining hub as many companies will build new refinery because of they are allowed to set price.

Government and Petroleum oil markers have locked horns over unpaid debt that caused immense scarcity of the product while commercial activities were grounded to a halt.

A shortage of dollars also hindered fuel importers from bringing in the products. These firms are pushing for a price of N165 saying the old price in gradually becoming unrealistic in the light of a volatile exchange rate.

The devaluation of the naira by 40 percent due to the adoption of a flexible exchange rate by the central bank in June 2016 spiraled debt in the capital structure of Forte Oil.

Forte Oil’s net finance costs spiked by 156.28 percent to N4.28 billion while it has the strength to pay such debt as interest coverage ratio is 2.24 percent.

The Nigerian downstream oil a gas giant has raised a N9 billion 5 year fixed rate bond with a view to strengthening the balance sheet and adding value to shareholder’s wealth.

Forte Oil’s share price closed at N74.96 on the floor of the Nigerian Stock Exchange (NSE) while market capitalization stood at N97.63 billion.

“With the raising if this initial capital which has been fully underwritten shows the confidence the investing public has in Forte Oil Plc has an investment choice,” said Akin Akinfemiwa, Group CEO of the company.

 

BALA AUGIE