Despite the plethora of challenges that reduced the profitability level of many of the petroleum marketing companies in their 2010 financial year, the management of Conoil Plc was able to make a difference by growing its profit and shareholders’ value, reports Festus Akanbi
The issue of petroleum subsidy and its backlash, still dominating national discourse has expectedly forced other issues in the downstream sector of the Nigerian petroleum industry to the background. The gale of scandals that characterised the attempts to probe the fuel subsidy scheme, the ongoing controversy triggered by the federal government’s attempt to suspend payment of fuel subsidy and the corresponding threat of oil marketers to hands off fuel importation have continued to form the basis of discussions among economic watchers in recent times. It is believed that these harvests of crises have taken the shine off the main challenges in the oil industry. Speaking at the 2012 Nigeria Refining Summit organised for members of the lower house of the National Assembly in Uyo, Akwa Ibom State recently, the House Committee on Petroleum Resources (Downstream), stakeholders in the oil and gas industry and eminent resource persons and consultants agreed that the development of the Nigerian downstream sector as an investment had been stagnated, underdeveloped and that, all of that were challenging.
Oil Marketers Performance in 2011
In terms of performance, the last operating performance of the operators in the nation’s downstream oil sector cannot be described as cheering. This is because although most of the so-called frontliners in the sector did record profits after tax in their operations, most of them could not improve on the performance in the preceding year. A random review of their performance, for instance, showed that while they all succeeded in raising their turnover level, their profit after tax could not grow beyond the level recorded in previous years while some oil marketing firms indeed recorded a drop in their performance.
For instance, Mobil Oil Nigeria Plc’s turnover rose to N62.09 billion in 2011 from N58.34 billion in 2010, but profit before tax dropped to N5.52 billion from N5.72 billion, while profit after tax also dropped to N3.75 billion from N3.88 billion
While Oando Plc’s consolidated(upstream, mid-stream, downstream) turnover rose to N586 billion in 2011 from N378 billion in 2010, its profit before tax (also consolidate) dropped to N14.9 billion from N24.4 billion, profit after tax also dropped to N3.43 billion from N14.37 billion.
For Total Plc, its turnover rose to N173.95 billion in 2011 from N160.6 billion in 2010, but profit before tax dropped from N5.86 billion to N5.78 billion, and profit after tax also dropped to N3.81 billion from N5.44 billion.
For MRS, turnover dropped to N70.95 billion from N74.78 billion, profit before tax dropped to N2.03 billion from N2.88 billion and profit after tax dropped to N1.04 billion from N1.85 billion.
Conoil’s Makes a Difference
This uninspiring performance trend notwithstanding, the management of Conoil was still able to post sterling performance during the period under review compared to the company’s peers in the industry. Apart from other indices which favour the company’s shareholders, it further consolidated its profitability with profit before tax rising from N4.02 billion to N4.4 billion. Profit after tax rose from N2.79 billion to N2.95 billion. The company’s turnover also increased to N157.51 billion in 2011 from N102.88 billion in 2010. Consequently, the board of the company has recommended payment of N1.73 billion to shareholders as cash dividends for the immediate past year as the leading petroleum-marketing company grew profit to N4.4 billion in 2011.
The dividend recommendation was contained in the audited report and accounts of Conoil Plc for the year ended December 31, 2011 released by the Nigerian Stock Exchange (NSE). The gross dividend recommendation implies increase in dividend per share from N2 for 2010 business year to N2.50 for the 2011 business year.
Analysts explained that the 25 per cent increase in cash payouts was reflective of the impressive performance of the company during the year as net earnings per share rose from N4.02 in 2010 to N4.25 in 2011. With these, Conoil has emerged as the best-return stock in the petroleum marketing sector with current dividend yield of about 12 per cent and earnings yield of about 20 per cent. These also placed the stock within the top-bracket of dividend paying stocks on the NSE. The report showed that the company grew sales by 53 per cent from N102.88 billion in 2010 to N157.51 billion in 2011. The report also showed a stronger balance sheet as retained earnings boosted shareholders’ funds to N16.82 billion in 2011 compared with N15.26 billion in 2010. Total assets rose by 49 per cent to N61.84 billion in 2011 as against N41.49 billion in 2010. Market analysts said the impressive dividend and profit and loss accounts performance were in line with market’s expectations given Conoil’s consistent growth over the years. As earnings per share increased from N2.62 in 2008 to N3.33 and N4.02 in 2009 and 2010 respectively, Conoil had increased cash dividend per share correspondingly from N1 in 2009 to N1.50 and N2 in 2009 and 2010 respectively.
Growing Shareholders Value
In his comments on the results, Chairman, Conoil Plc, Dr. Mike Adenuga (Jnr), said the results were indicative of the commitment of the board and management to growing shareholders’ value irrespective of the operating challenges. He pointed out that the company launched far-reaching initiatives to strengthen its income base in core segments of its business particularly in retail, lubricants, aviation, gas and specialised products. “We shall continually strive to take advantage of emerging opportunities to repay the faith and confidence that our loyal shareholders have shown in us,” Adenuga said. He said Conoil would continue to consolidate the progress it had made in the past years and leverage on its unique position as Nigeria’s leading oil marketer to continuously improve returns to all stakeholders.
Conoil’s Competitive Edge
Indeed, the company’s huge investment in the massive depot in Port Harcourt, Rivers State, which complements its flagship depot in Apapa, Lagos had begun to deliver tangible results. The ultra-modern facility, which cost about N12 billion, has augmented Conoil’s storage capacity by 40 million litres across all products to provide easy access to fuel imports and ease the current pressure on available jetties and other port infrastructures in Lagos.
As part of the strategic drive to shore up its bottom-line, Conoil has also repositioned its lubricants business, building two additional state-of-the-art oil blending plants in Apapa and another one in Port Harcourt, all of which the management said had pushed up its production capacity significantly.
The company also introduced into the market, a new brand of engine oil called Okada Golden Super, which is manufactured specially for 4-stroke motorcycles and tricycles.
Also, the company, through innovation in the production and distribution of Liquefied Petroleum Gas (LPG) from the state-of-the-art LPG bottling plant located in Ikeja, Lagos, launched itself as a leader in the provision of services that are of world-class standards to consumers.
Explaining the company’s impressive growths in turnover and profitability, a statement issued by the management said: “Our company maintained its leadership position in the industry against all odds, scoring many firsts in the areas of product development, service delivery and setting new standards with ground-breaking initiatives.”