Business

Oando Vs Eterna: Eterna smaller but more profitable

By Folakemi Emem-Akpan

Oando and Eterna are two major players in the petroleum subsector of the Nigerian economy. They are also well known and popular. Of the two, Oando is clearly the bigger. For example, its N455.7 billion turnover for 2016 was more than three times the size of Eterna’s N106.9 billion turnover. Oando also had more assets, liabilities and equity than Eterna did during the year under review.

That’s where Oando’s superiority ends though. In terms of profitability ratios, Eterna was the hands down winner. We examined six profitability ratios and Eterna took the top spot in five, with Oando managing to take the lead in only one.

Turnover growth rate

This was the only ratio in which Oando was the winner of the two for the 2016 financial year. The company was able to grow the level of its gross earnings from N203 billion in 2015 to N456 billion in 2016, and translating to a 124 per cent growth rate. Meanwhile, Eterna was able to advance its gross earnings, such gross earnings rising to N106.9 billion from N92.1 billion in the preceding year. Analysis shows that this translates to a growth rate of 16.1 per cent. While this was high enough in its own right, it wasn’t as high as that of Oando, making Oando the clear winner.

Pre-tax profit growth rate

Even though Oando recorded a much better turnover in 2016 than it did in 2015, it couldn’t maintain such momentum to its pre tax profit. The company’s cost of sales ballooned out of control, growing to as much as N426 billion from a mere N157 billion in the prior year. This ate into gross profit substantially, and as the company couldn’t also effectively curtail operational and administrative expenses, it recorded a pre-tax loss rather than a profit. Thus, pretax loss for Oando was N32.8 billion, less than a loss of N51.1 billion in the preceding year, and because the loss was lower than that of the prior year, it had a growth rate of 35.8 per cent.

On the other hand, Eterna’s profit stood at N2.4 billion, 84.6 per cent more than what was recorded in the prior year. It is thus the winner in this respect.

Profit margin

Eterna was also better able to translate its turnover to profit than Oando was. For the 2016 financial year, pre-tax profit margin (which measures a company’s ability to squeeze as much profit as is possible from turnover) for Eterna was 2.2 per cent, higher and better than Oando’s result. Oando had a loss margin of 7.2 per cent, meaning it lost N7.20 on every N100 income earned. This is as compared to the profit of N2.20 that Eterna made on every N100 income earned.

ROE

Eterna was easily the winner in terms of return on equity for the 2016 financial year. Working with shareholders’ funds valued at N10.83 billion, Eterna was able to record a return on equity of 13.7 per cent. This 13.7 per cent return on equity is as compared to and better than Oando’s ROE of 1.8 for 2016 which was as compared to a loss on equity of 97.6 per cent for 2015.

Analysis shows that while every N100 worth of equity deployed by Eterna earned it N13.70 in after-tax profit, such N100 equity deployed earned Oando a profit of N1.80.

ROA

Return on assets followed a slightly different pattern from ROE did, with Oando recording a loss and Eterna recording a return. Oando had a loss on assets of 3.3 per cent while Eterna had a return on equity of 7.6 per cent.

Operating margin

This was another ratio in which Eterna came out tops. As a ratio, this should be kept as low as possible without compromising quality. Eterna had a ratio of 2.8 per cent, as compared to the 2.0 per cent result recorded in 2015. This result was also better than Oando’s 23.0 per cent result.

A point to consider

It is important to note that the 2016 financial year was not a good one for Oando Plc on many levels, and it seemed to be one of the companies hardest hit by Nigeria’s economic recession. On the other hand, Eterna performed better in 2016 than it did in 2015.

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