Eterna: Sustaining confidence with dividend payout to shareholders

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By Olabode Jegede

Eterna Plc for 2018 financial year result and accounts sustained shareholders’ confidence with dividend payout despite slowdown in profit on the heels of growing cost of sales and finance cost.

With growing total assets, the petroleum marketing company grew revenue and drive significant growth in non-core business. Despite reporting 29.3 per cent decline in profit, the company declared a final dividend of N0.25 kobo per 50 kobo, payable to shareholders on June 14, 2019.

As the crude sales increased significantly due to increased volume sold, Eterna with little filling stations across the country recorded growth in revenue generated from fuel and trading.

Eterna early in the year announced plans to increase the number of its petrol stations in Nigeria, with an intention to make some assets acquisition before 2025, which will boost the company’s operation within the country.

The management had announced plans to increase the number of its petrol stations across the country to 200 and acquire upstream oil and gas assets in the next five years.

Revenue from fuel and trading contributed about 20per cent and 77per cent of the company’s total revenue for 2018 respectively.

The group reported 45.6 per cent increase in revenue to N251 billion last year from N173 billion reported in prior year.

Due to numerous macro economic challenges that led to double digit inflation and hike in foreign exchange, cost of materials and deliver cost impacted on the company cost of sales closing 2018 at N247 billion, an increase of about 48.3 per cent from N166.69 billion reported in 2017.

The breakdown of cost of sales revealed that Material cost moved to N246billion from N166 billion in 2017 while delivery cost increased to N885million from N410.7million reported in 2017.

Consequently, the Eterna reported 26.7 per cent decline in gross profit to N4.64 billion from N6.3 billion in 2017.

However, the group total operating expenses increased by 2.4 per cent to N3.25 billion in 2018 from N3.17 billion.

For the year under review, Eterna non-core income stood at N1.98 billion in 2018 from N29.6 million in 2017, attributable to N1.18 billion accrued interest on promissory note received from the federal government. The company also reported N40.5 million rent income in 2018 from N13.4million in 2017, another factor that contributed to significant increase in non-core income last year.

Finance income dropped by 45.6 per cent to N77.56 million from N142 million as finance cost rose by 62.2 per cent to N869 million from N535.88 million reported in 2017.

In 2018, Eterna “other financial charges” increased significantly to N474.9 million from N174 million while interest on long term financing rose from N334 million to N358 million in 2018.

In addition to finance cost breakdown, the company reported interest cost on employee benefits to N26.6million from N20.85 million in 2017 while accretion charge closed 2018 at N9.4 million from N6.88 million in 2017.

This brings the company profit before tax to N1.99 billion, 29.3 per cent below N2.8 billion reported in 2017.

Eterna’s total tax expenses rose by 20.9 per cent to N980 million, to position the company profit for the year by 49.6 per cent decline from N2 billion reported in 2017 to N1 billion in 2018.

The decline in profit dragged the group Earnings Per Share down by 50 per cent to N0.77 from N1.54 per share reported in 2017.

 

Hike in trade and other receivables drive total assets

Eterna reported growth in trade and other receivable that impacted on increase in total assets last year.

The company’s total assets appreciated by 10.6 per cent to N53 billion from N48 billion in 2017, attributable to N30.8 billion trade and other receivables reported in 2018 from N28.6 billion in 2017.

Non-current assets also grew by 18.5 per cent to N9.8 billion from N8.28 billion while current assets closed 2018 at N43.3 billion from N39.76 billion, representing nearly nine per cent increase.

Similarly, total liabilities grew by 13 per cent to N40.3 billion in 2018 from N35.6 billion reported in 2017.The increase in total liabilities was driven by 8.6 per cent increase in current liabilities to N36.58 billion in 2018 from N33.7 billion in 2017.Eterna’s non-current liabilities grew by 88.4 per cent to N3.68 billion in 2018 from N1.95 billion in 2017.

In addition to balance sheet position, the company’s total equity grew by 3.7 per cent to N12.9 billion in 2018 from N12.4 billion in 2017.

The performance of Eterna is commendable despite series of challenging petroleum marketing companies in the country are facing.

Recent reforms in the Oil and gas sectors have continued to stimulate the company’s revenue growth while increasingly efficient cost management in finance income appeared to be providing additional impetus.

We expected that the present stable pricing of PMS among other petroleum products should drive aggressive revenue growth and provide impetus for future growth of Eterna.

Nigerian NewsDirect urged the management to remain focused on increasing its retail outlets and justify investors’ confidence with higher earnings and dividend yields by the end of 2019 financial year.

The Managing Director/Chief Executive Officer, Eterna, Mahmud Tukur had said the firm would be in a position to participate in future marginal fields bid round.

While disclosing the company’s investment plans, Tukur said Eterna would invest in liquefied petroleum gas facilities and roll-out of LPG distribution channels nationwide using retail outlets and independent distributors.

He also addressed the technical partnership the company has with Castrol, which date back to 1991, stating that conversation is ongoing regarding the expansion of Castrol’s portfolio of local products.

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