MRS overcomes subsidy gloom as it reverts to profitability

Background

The company started marketing of petroleum products in Nigeria in 1913, under the Texaco brand name.

This was then distributed exclusively by CFAO, a French multinational retail company. In 1964, Texaco Africa Limited started direct marketing of Texaco products, selling through service stations and kiosks acquired from the said multinational retail company, on lease terms. It also entered the aviation and bunkering business.

On August 12, 1969, Texaco Nigeria Limited was incorporated as a wholly-owned subsidiary of Texaco Africa Limited, thus inheriting the business formerly carried out in Nigeria by Texaco Africa Limited.

With the promulgation of the Nigeria Indigenisation Decree in 1978, 40 percent of Texaco Nigeria Limited was sold to Nigerian individuals and organisations by Texas Petroleum Company.

In 1990, the Companies and Allied Matters Decree came into force and this necessitated the dropping of ‘Limited’ from the company’s corporate name to the prescribed ‘Public Limited Liability Company’(plc) with its shares quoted on the Nigerian Stock Exchange.

Following the creation of ChevronTexaco in 2001, from the merger between Chevron Corporation and former Texaco Inc., Texaco Nigeria plc became an integral part of the new corporation. As ChevronTexaco considered the acquisition of former UNOCAL, the board of ChevronTexaco decided to drop ‘Texaco’ and retain only Chevron as the new name of the enlarged corporation.

Effective September 1, 2006, the company’s name changed from Texaco Nigeria plc to Chevron Oil Nigeria plc following a directive from the Chevron Corporation’s headquarters to all affiliate companies designed to present a clear, strong and unified presence of Chevron Corporation throughout the world.

In 2009, MRS acquired Chevron Oil Nigeria plc.

Financial results for Q1 2014

MRS Nigeria plc, a Nigerian company that operates in the downstream oil and gas sector, has released its Q1 2014, with stellar performance at both top- and bottom-line level. The company was able to achieve these impressive results despite the delay in subsidy payment in 2013, which affected most firms in this sector.

For the first three months through March 2014, MRS grew gross revenues by 54.67 percent year-on-year to N24.16 billion from N15.62 billion same period in the prior year (Q1’13).

The company reverted to profitability as it recorded profit before tax of N321.21 million from a loss position of N271.96 million, at the end of March 2013.

Profit after tax also followed the same growth trajectory as it moved to a positive position of N171.98 million in Q1’2014, as against loss recorded in 2013. Earnings per share also moved to a positive position of 68k in Q1’14, from a negative figure of 107k as of Q1’2013.

It would be recalled that the subsidy delay caused a lot of companies in these sector to record slow growth as they didn’t have enough cash-flow settle monies borrowed from banks.

Hence, this led to hugh cost in their capital structure as they were unable to meet such obligation.

Based on BusinessDay investigation, input costs were high as cost of sales margin surged to 93.33 percent in Q1’14, from 4.48 percent as of Q1’13, while operating margin ratio declined to 5.46 percent in 2014 as against 6.24 percent in 2013.

The company was able to efficiently and effectively manage operations as net margin, which measures this, also reverted to a positive figure of 1.32 percent in Q1’14, from a negative figure of 1.73 percent as of Q1’13.

Operating expenses in the review period increased by 35.83 percent to N1.32 billion in Q1’14, compared with N975.77 million as of Q1’13. MRS’s total assets were down by 17 percent to N54.55 billion in Q1’14, as against N65.69 billion as of Q1’13.

The Return on Equity, which measures the overall efficiency of the company in managing its total investment in assets and in generating return to shareholders, reverted to a positive figure of 0.31 percent in 2014, from a negative figure of 0.41 in 2013.

Return on assets followed the same growth trend as it also moved to a positive position of 0.86 percent in 2014, compared with -1.38 percent in 2013.

Share performance and outlook

MRS share price has increased by 455 percent in the past year to close at N51.72 on May 13, 2014, on the floor of the Nigerian Stock Exchange, and the company had a market capitalisation of N13.13 billion on the same day.

BALA AUGIE