Conoil HI profit down 36.77% on ballooning input cost

Nigerian petroleum marketer, Conoil plc, had half year (H1) profit crimped by ballooning input cost culminating in low income margins, analysis of the company’s financial statement shows.

For the six months through June 2014, Conoil’s net income tumbled by 36.77 percent to N1 billion from N1.59 billion, as of HY 2013, while revenue dipped by 1.41 percent to N78.50 billion.

Earnings per share (EPS) declined to 146k in HY compared with 230k as of HY 2014

The performance of the company is peculiar with the industry as a lot of firms incur spiralling costs on importing refined product into the country. This however leaves them with low income margins.

Cost margins were as high as 90 percent which caused gross profit to reduce to N7.82 billion in HY 2014, compared with N8.32 billion as of HY 2013.

Net margin, a measure of efficiency profitability and efficiency, reduced to 1.28 percent in HY 2014, from 2.5 percent the preceding year.

Further, as reported earlier by BusinessDay, huge finance costs are incurred due to money borrowed to finance the importation of refined product.

Despite the inherent operating challenges, Conoil reduced interest costs by 18.90 percent to N882.36 million in HY 2014, as against N1.08 billion last year.

However, the proportion of outside lenders fund in its capital structure is still high as debt to equity ratio spiked to 100.2 percent in 2014, from 65.55 percent the preceding year.

Despite the security challenges, Nigeria grapples with poverty and the hold back of investment by international oil companies (IOCs), the country’s oil and gas sector has the potential to contribute about $108 billion by 3030, up from $73 billion in 2013, a Mckinsy report has stated.

Total assets reduced by 4.81 percent to N78.40 billion in the review period as against N82.37 billion, as of HY 2013. The company has upgraded and expanded its lubricant blending plants at its depots at Apapa, Lagos, Port Harcourt and Kano, with a view to meeting and surpassing customers’ ever increasing demand for its quality engine oil brands.

The board of directors of the oil marketing firm recommended a total dividend payment of N2.78 billion for its 2013 financial year at N4 for every 50 kobo share. The dividend payment is expected to be rectified by the shareholders at the annual general meeting of the company to be held in September.

This represents a 300 percent increase over the N1 paid in 2012, and also translates to a dividend yield of 5.33 percent.

Return on average equity was (ROAE) was 14.15 percent, while return on average assets (ROAA) stood at 3.09 percent, respectively. The company’s share price closed at N68.45 – August 19, 2014, on the floor of the Nigerian Stock Exchange, while market capitalisation was N46.49 billion.

BALA AUGIE