Conoil Plc: Weak revenue impacts on profits in Q3
By Kayode Tokede
Conoil Plc in its unaudited third quarter (Q3) ended September 2020 reported poor performance as key financial parameters recorded decline.
The decline in revenue impacted on the petroleum marketing company profits in the period. The management was prudent in managing cost as finance cost and total operating expenses dropped by 54.9per cent and 17 per cent respectively.
Conoil’s revenue dropped by 21.8 per cent to N88.1billion in Q3 2020 as against N112.7 billion reported in Q3 2019.
The breakdown of revenue revealed that Conoil reported N82.68billion white products sales in Q3 2020 and generated N5.42billion from sales of lubricants.
The company has identified three operating and reportable segments: White products, lubricants and Liquefied Petroleum Gas (LPG).
The white products segment is involved in the sale of Premium Motor Spirit (PMS), Aviation Turbine Kerosene (ATK), Dual Purpose Kerosene (DPK), Low-pour Fuel Oil (LPFO) and Automotive Gasoline/grease Oil (AGO). The products under the lubricants segment are Lubricants transport, Lubricants industrial, Greases, Process Oil and Bitumen. Products traded under LPG segment are Liquefied Petroleum Gas – Bulk, Liquefied Petroleum Gas – Packed, cylinders and valves.
In addition, cost of sales was dropped by 21 per cent to N80.16billion in Q3 2020 from N101.67billion reported in Q3 2019.
For the period under review, the management of Conoil was able to grow non-core business transactions to N212.3million in Q3 2020 as against N92.7million reported in Q3 2019.
From the reported, total operating moved from N6.86billion in Q3 2019 to N5.69billion in Q3 2020. The breakdown revealed that distribution expenses dropped by 21.2 per cent to N1.39billion in Q3 2020 from N1.77billion in Q3 2019 while, administrative expenses also dropped by 15.6 per cent to N4.3billion in Q3 2020 from N5.09billion reported in Q3 2019.
Finance cost dropped by 54.9 per cent to N826.8million in Q3 2020 as against N1.83billion reported in Q3 2019.
The company reported a profit before tax of N1.63billion in Q3 2020, 33.4 per cent below N2.45billion reported in Q3 2019.
Meanwhile, Conoil recorded an impressive performance in audited profit and loss figures for the financial year ended December 31, 2019 on the heels of moderate growth in revenue and decline in finance cost.
Conoil has maintained a consistent dividend payment policy for good seventeen years (2001 to 2017), implying that it is capable of delivering returns on investment as and when due.
Even though there has been variance in the value of dividend declared over the years, reaching its seventeen-year high in 2013 at N4 per share, Conoil has managed to pay a dividend and keep afloat despite the fairly long period of economic recession.
The company in 2019 witnessed significant increase in non-businesses core transactions over 130.28 per cent increase in service income that moved from N24.14million in 2018 to N99.05million reported in 2019.
Conoil’s non-core business core gained 56.4 per cent to N123.6million in 2019 from N79.01million in 2018.
The results of Conoil showed stronger total assets with current assets contributing 93 per cent.
The petroleum marketing company audited report and accounts for the year ended December 31, 2019 showed a generally impressive performance but the company appeared to be stable with balance sheet size and liquidity positions.
Contributors to revenue
Conoil increased revenue by 14.4 per cent to N139.8billion in unaudited financial year results for December 31, 2019 from N122.2billion reported in 2018 audited results.
The increase in revenue was driven by 13.7 per cent increase in Premium Motor Spirit (PMS) to N132.6billion in 2019 from N116.5billion reported in 2018 while revenue from Lubricants rose significantly by 26.3 per cent to N7.18billion in 2019 unaudited results as against N5.69billion reported in audited 2018.
Cost of Sales rose by 15.2 per cent to N126billion in 2019 from N109.44billion reported in 2018 to position gross profit by 7.4 per cent to N13.7 in 2019 as against N12.77billion reported in 2018.
Consequently, the proportion of Cost of Sales/ Revenue moved from 89.6 per cent in 2018 to 90.2 per cent in 2019.
Operating expenses reports double-digit figures: Conoil reported a double-digit in its total operating expenses over 19.6 per cent increase in distribution expenses. The company for the year under review reported N3.07billion selling & distribution expenses as against N2.57 billion reported in 2018.
Marketing and administrative expenses also grew by 10.2 per cent to N6.87billion in 2019 from N6.24billion in 2019. The interplay between the two brings total operating expenses to N9.95billion in 2019 from N8.81billion reported in 2018.
Effective management of finance cost
Conoil for the unaudited financial statement was effective in managing in its finance cost that dropped significantly by 26.3 per cent to N1.11 billion in 2019 from N1.51billion reported in 2018. As highlighted, Interest 1on bank overdraft dropped from N1.51billion in 2018 to N1.11billion in 2018 while Accretion expense increase to N3.4million in 2019 from N2.9million reported in 2018.
The petroleum marketing company explained that, Bank overdrafts are repayable on demand. The average effective interest rate on bank overdrafts approximates 18.57per cent (2018: 25per cent) per annum and are determined based on NIBOR plus lender’s mark-up.
The overdraft was necessitated by delay in payment of outstanding subsidy claims from the Federal Government on importation/purchase of products for resale in line with the provision of Petroleum Support Fund Act for regulated petroleum products.
Profits soar in 2019 audited FY
With effective management of finance cost, and gain in non-core business transactions, Conoil for the period did not fail shareholders to announce increase in profits. Profit before tax for unaudited 2019 financial year results showed an increase of 8.2 per cent to N2.78billion as against N2.57billion reported in 2018. The company last year paid N791million tax income, 2.7 per cent increase over N770.7million reported in prior year.
Besides, the underlying basic Earnings Per Share (EPS) also recorded a growth of 10.4 per cent to N2.86 in 2019 from N2.59 reported in 2018. Conoil’s key ratio gained momentum in 2019 as return on equity move from 9.8 per cent to 10.5 per cent in 2019 while return on assets dropped marginally from 4.2 per cent to four per cent in 2019. In addition, profit margin for the year dropped to two per cent from 2.1 per cent in 2018.
Stronger asset quality amid challenges
Conoil total assets increased by 13.6per cent to N69.2 billion in 2019 from N60.9 billion in 2018. Long-term assets was dropped by 15.3 per cent from N5.99 billion to N5.07billion in 2019 while current assets rose by 16.8 per cent to N64billion in 2019 as against N54.9 billion recorded in 2018.
Meanwhile, total liabilities also increased by 18.1 per cent from N42.6 billion in 2018 to N50.3 billion recorded in 2019. Total equity thus rose by 3.3 per cent from N18.3billion in 2018 to N18.9billion recorded in 2019. The group’s balance sheet supports provide a business expansion across the country and Africa in years ahead.
Conoil Plc is a Nigerian petroleum marketing company involved in the sale of regulated gasoline and kerosene, diesel, aviation fuel, and low pour fuel. Other business activities of the firm include production and marketing of lubricants under the brand name Quatro. The company was previously known as National Oil and Chemical Marketing Plc until it was acquired by Conpetro in 2002.
The company’s shares are currently trading at N20 on The Exchange.
