Conoil’s profit surges 23.02 % on reduced finance costs

Conoil Nigeria Plc.’s full year net income has increased by 23.02 per cent, thanks to a reduction in finance costs as the company continues to record strong margins amid a volatile and tough operating environment.
The downstream stream oil and gas giant’s profit after tax increased by N530 million to N2.83 billion in December 2016 as against N2.30 billion the previous period. Sales were up by 2.55 per cent to N85.02 billion.

The growth in profit was due to 53.06 per cent reduction in interest expense to N1.76 billion as the company booked an overdraft due to delay in payment of subsidy monies by the Federal Government on importation/purchase of product, according to the company’s 2016 audited financial statement.

Conoil’s ability to pay interest on loans from banks is not impaired as interest coverage ratio of 3.3 times is lower than the 1.50 times global standard. Interest coverage ratio is used to determine how easily a company can pay interest on its outstanding debt.
Conoil has steady dividend policy. Its directors have recommended the payment of a dividend of 310 kobo per share on the 2016 earnings. This translates to a pay-out of 75.83 per cent while dividend yield stood at 7.42 per cent as at close of trading on Wednesday.

Conoil operates in a tough and unpredictable operating environment as devaluation of the currency and delay in subsidy money continues to undermine growth.

Refusal to pay subsidy arrears by the Central Bank of Nigeria (CBN) and foreign exchange differential of $1.2 billion has hindered oil marketers from honouring obligations to banks.

Analysts say the big companies in the industry can weather the storm on their robust cash flows and supports from their owners.
Conoil’s cash and cash equivalent increased by 185.83 per cent in December 2016 from N11.65 billion the previous year. The firm’s net margins, a measure of efficiency, moved to 3.37 per cent in December 2016 from 2.71 per cent as at December 2015.

Return on equity (ROE) increased to 15.63 per cent in December 2016 from 13 per cent as at December 2015.

Conoil’s share price gained 5 per cent to close at N40 as of Wednesday, valuing the company at N28.05 billion.

 

BALA AUGIE AND BUNMI BANJO