• Monday, July 15, 2024
businessday logo


Forte Oil profit rises on other income, lower finance charges  

Forte Oil

Forte oil Nigeria Plc recorded a 30.11 percent rise in net profit, stoked by the contributions from other income and the company’s ability to reduce finance charges amid delay in subsidy payments and currency devaluation.

Analysts say the company’s stellar performance at the bottom line means its strategic risk management strategy is yielding fruit as strong earnings growth and lower gearing culminated in higher returns to shareholders.

Forte Oil reported net earnings of N5.79 billion, for the company’s 2015 full year which is higher than the N4.45 billion, it recorded in 2014.

The growth in profits can be attributed to an increase in other income by 65.67 percent to N4.05 billion as the company continues to make a leap forward in profit on sale of forfeited shares and gains from the disposal of investment property.

“This represents interest on dividend paid to a shareholder on shares not paid for, and accrued interest on proceed of the company’s shares forcefully collected by the shareholders,” said the company in its 2015 audited financial statements, posted on the website of the Nigeria Stock Exchange (NSE).

The recovery was based on the ruling of the Securities and Exchange Commission, according to the company.

Forte Oil also reduced the level of borrowing in its books as finance charges fell by 21.59 percent to N1.67 billion in 2014 as against N2.13 billion.

This culminated in lower gearing as debt to equity (D/E) ratio fell to 62 percent in 2015 as against 68 percent in 2015.

A low D/E ratio means a company is less susceptible to finance risk and there are no threats to its existence.

While Forte Oil’s bottom lines increased as a result of focus strategy and aggressive market penetration its sales took a hit from delayed subsidy payments.

Sales reduced by 26.25 percent to N124.61 billion in the period under review as against N170.12 billion as at December 2014.

The Nigerian downstream oil and gas player had said unpaid government debts and a devalued naira is causing stumbling blocks as revenue continues to falter.

“PMS is our major revenue driver whose supply was extremely inadequate in the first half of the year 2015 due to the delays in payment of outstanding subsidies by the government,” the company said in an email to BusinessDay.

“This resulted in inability to import products as the banks were unable to finance LCs for importation due to the huge exposure to subsidy.  We however maximized our margins from the products available and also concentrated on deregulated products, said the company.”

Further analysis of the financial statement of Forte Oil shows the company is efficient and profitable while recording  higher margins as net profit margin increased to 4.64 percent in 2015 as against 2.61 percent as at December 2014.

Additionally, cost of sales margins reduced to 85.26 percent in 2015 from 89.14 percent last year. Cost of sales reduced by 29.54 percent to N106.25 billion.

Forte Oil’s has effectively utilized shareholder’s assets in generating higher profit as return on equity (ROE) increased to 12.52 percent in 2015 from 10.56 percent as at December 2014.

Return on assets rose to 4.75 percent in 2015 compared with 3.20 percent as at December 2014.

The company’s share price closed at N289.17 on the floor of the exchange while market capitalization was N387.91 billion.