Despite the challenging economic conditions that threatened the profitability of companies in Nigeria, MRS emerged as the top company with the largest cash generated from its core business activity in the first three months of 2023.
The industry, which plays a crucial role in the supply chain of petroleum products, faced a downward trend in cash from operations, recording a loss of N33.44 billion in the first quarter of 2023 compared to a gain of N0.148 billion in the same quarter of 2022.
However, only MRS Oil Nigeria Plc recorded a positive in terms of cash from operating activities. It recorded a gain of N3.92 billion in the first quarter of 2023 from a loss of N1.30 billion recorded in the same period of 2022.
“The operating losses experienced by players in the downstream sector in the first quarter of 2023 can be attributed to the naira redesign policy that impacted majorly the transaction flow,” Kelvin Emmanuel, energy sector expert and co-founder/CEO at Dairy Hills. said.
Cash flow from operating activities represents the cash generated or used by a company’s core business operations, excluding any cash flows related to investing or financing activities.
“The deregulation of petrol pricing in line with sections 205(1) of PIA 2021, the introduction of a commercial refinery, and unification of the exchange rate will see a resurgence of the downstream sector in the outlook for the remaining two quarters of 2023, ” Emmanuel said.
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BusinessDay’s findings showed now is the best time to buy downstream oil and gas stocks and add to your portfolio as the abrupt removal of the subsidy on Premium Motor Spirit (PMS) by the newly elected president Bola Tinubu is expected to bolster sector players’ earnings, which paves the way for them to pay bumper dividend.
Already, these firms are among the best performers on the NGX all share index (ASI), which means investors had wagered on them and anticipated sector reforms that are ongoing.
The downstream sector surveyed includes Mrs Oil Nigeria Plc, Eterna Plc, Conoil Plc and Total Energies Marketing Nigeria Plc.
Eterna Plc
In the first quarter of the year, Eterna Plc experienced a significant decline, with a loss of 309.84 percent amounting to N3.476 billion. This is in stark contrast to the previous year’s same period, where they had achieved a gain of N1.66 billion.
The main factors contributing to this downturn were an escalation in inventory, an increase in debtors, and a rise in prepayment.
However, there was a slight improvement in the profit for the evaluated period, showing a 0.9 percent increase. It reached N1.09 billion compared to the corresponding period of 2022, where it stood at N1.08 billion.
MRS Oil Nigeria Plc
MRS Oil Nigeria Plc achieved a positive outcome in terms of cash generated from operating activities. In the first quarter of 2023, they experienced a significant gain of N3.92 billion, which is a remarkable improvement compared to the loss of N1.30 billion recorded in the same period of 2022.
This favourable result can be attributed to two factors: the receipt of advances from their customers and an increase in trade and other payables.
MRS Oil’s trade and other payables rose by 16.8 percent to N18.77 billion, up from N16.07 billion.
Moreover, MRS Oil Nigeria Plc’s profit after tax for the evaluated period amounted to N1.48 billion in the first quarter of 2023, demonstrating a significant improvement from the loss after tax of N41.45 million recorded in the first quarter of 2022.
Conoil Plc
Conoil witnessed a decline in its cash generated from operating activities, dropping to N3.95 billion in the current quarter from a higher figure of N4.73 billion achieved in the same quarter of 2022.
However, there was a notable improvement in Conoil’s profit margin, which reached 8.59 percent in the first quarter of 2023. This represents a significant increase compared to the profit margin of 2.1 percent recorded in the corresponding quarter of 2022. In fact, this marks the highest profit margin reported by Conoil in the past seven years.
Total Energies Marketing Nigeria Plc
The downstream company experienced a substantial rise in losses during the first quarter of 2023, with a staggering increase of 506 percent. The recorded loss amounted to N29.9 billion, a jump from the loss of N4.94 billion recorded in the same period of 2022.
Furthermore, there was a decline in the profit after tax for the first quarter of 2023. It decreased by 5 percent, reaching N4.16 billion, in comparison to the N4.37 billion profit recorded in the same quarter of 2022.
