Ardova reports worst performance in 10 years

By Philemon Adedeji

Despite growing revenue by 19.5per cent year-on-year (YoY), Ardova Plc reported N7.61 billion loss in its unaudited result & accounts for the year ended December 31, 2022 from N3.85 billion reported in the audited financial statement for period ended December 31, 2021.

The reported loss is the company’s worst performance since the new management takeover in 2018 and dividend payout to shareholders may not come soon.

From the profit & loss figures, the group announced N7.14 billion loss before tax in 2022 from  N2.9 billion loss before tax in  2021, attributable to increased cost of sales, total operating expenses, and finance costs.

The management leveraged on its station expansion to drive revenue to N240.8billion in 2022 from  N201.44 billion, primarily due to an increase in fuel by 16 per cent to N202.54 billion in 2022 from N174.54 billion in 2021 that offset the gains recorded across the Lubricants and greases (+25.16 per cent y/y); Solar system (+378per cent y/y); Liquefied Petroleum Gas (LPG) and Cylinder Sales  (+378.32 per cent y/y); and Haulage and transportation services (+5166.9 per cent y/y) product lines.

Ardova’s poor performance came on the backdrop of N226.9 billion cost of sales in unaudited 2022 results, representing an increase of 18.4 per cent from N191.59 billion reported in 2021FY.

The group’s cost of selling fuel, and other petroleum products were a major driving factor.

Specifically, cost of selling fuel jumped by 15.4 per cent to N193.4 billion in 2022 from N167.62billion in 2021, while lubricants and greases cost of sales increased to N27.65billion in 2022 from N21.28 billion reported in 2021.

With the growth in revenue and significant increase in cost of sales, the group reported N13.96 billion gross profit in 2022, representing an increase of 41.7 per cent from N9.85billion in 2021.

Gross margin came in at 5.8 per cent in 2022 from 4.89per cent in 2021, as cost of sales margin reduced to 94.2 per cent in 2022 from 95.1per cent in 2021.

Ardova’s profit before tax margin stood at -3 per cent in 2022 from -1.5 per cent in 2021 as profit after tax margin was at 3.2 per cent in 2022 from -1.9 per cent in 2021.

However, other non-core business income hit N2.12billion in 2022, an increase of 144per cent from N868.83 million in 2021, driven by sundry income that increased from N569.8 million in 2021 to N1.5 billion in 2022. Sundry income represents income from sales of scrap and empty packaging materials.

The group, thus reported N18.57 billion total operating expenses in 2022, representing an increase of 87 per cent from N9.93 billion reported in 2021. The breakdown of total operating expenses showed a N6.39billion distribution expenses in 2022, an increase of 40.1 per cent from N1.9 billion in 2021, as administrative expenses rose significantly by 260.7 per cent to N12.18 billion in 2022 from N8.03billion in 2021

It reported N2.5 billion operating loss in 2022 as against operating gain of N785.75 million in 2021.

The breakdown of operating loss linked to N4.7 billion operating loss in fuels segment in 2022 from N1.78 billion operating profit in 2021, while Lubricants and greases recorded 69.7 per cent increase in operating profit to N2.48 billion in 2022 from N1.46 billion reported in 2021.

As finance income closed 2022 at N405.53 million in 2022 from N157.07million in 2021, finance cost rose by 41 per cent to N5.05 billion in 2022 from N3.58 billion in 2021.

The growth in finance cost was influenced by N2.44 billion interest expense on bank loans and overdrafts in 2022 from N1.05 billion in 2021 and N2.53 interest on long term bond/Trade loans in 2022 from N32.13 million in 2021.

It then closed 2022 with net finance cost of N4.6billion from N3.43 billion reported in 2021.

Overall, the group closed 2022 with negative N5.83 Earning Per Share as against N0.95 in 2021.

Concerns over growing Trade and other receivables

Ardova’s total assets in the period under review increased by nearly six per cent N134.4 billion from N126.9 billion reported in 2021.

Key contributing factors to increase in total assets was 39 per cent increase in Trade and other receivables that moved to N54.25 billion in 2022 from N38.9 billion reported in 2021 and 43.05 per cent increase in trade and other payables to N68.46 billion in 2022 from N47.866 billion in 2021.

However, the group’s total current assets dropped by 12.16 per cent to N70.86 billion in 2022 from N80.7 billion in 2021, while total non-current assets appreciated by nearly 38 per cent to N63.56 billion in 2022 from N46.2 billion in 2021.

This brings the group’s total non-current assets/ total assets proportion to 47.28 per cent in 2022 from 36.42 per cent in 2021.

Also, from the balance sheet position, the group reported N125.15 billion total liabilities in 2022, an increase of 14per cent from N109.78 billion in 2021.

The breakdown of Ardova’s total liabilities shows a 11.47 per cent drop in total non-current liabilities to N47.1 billion in 2022 from N53.2 billion reported in 2021 as total current liabilities rises to N78.05 billion in 2022 from N56.57 billion in 2021.

Business Outlook

The petroleum marketing company stated that the industry is likely to experience continued supply constraints and other uncertainties in 2023.

“In Nigeria, the full implementation of the Petroleum Industry Act will be a front burner during the year.

“As a team, we will strive to be strategically positioned to face these changes head-on. We understand that our lubricants business is a significant contributor to the sustainability of our business, hence, we will focus on increasing our customer base and enlarging our market share.

“As an organisation, we sustain a high-performance culture across every stratum of our business to stay true to our vision,” the company explained.

Remarks

The Chief Executive officer, Ardova, Mr. Olumide Adeosun in a statement said,   “Despite the economic and market headwinds, we continued to make good progress on our strategic transformation in Q4, including advancing our lubricant business, imbibing a high-performance culture across every stratum of our business, and improving our operational structure and processes to drive efficiencies.

“In 2023, we will continue to navigate the short-term challenges while striving to meet our long-term commitments, including delivering revenue growth anchored on redefining how we operate and improving quality of our customer base, powered by all-round efficiency and supercharged by our incredible team.”

The Chief Finance Officer, Ardova, Moshood Olajide said, “In the fourth quarter, we took steps to keep the organisation on track, especially with delivering on our investments, prioritising the areas where we can deliver the highest value for the long term.

“These actions underpin our productivity targets in 2023, and set the stage to achieve a gross profit to OPEX ratio of 1.4 in the year.”