Conoil Sustains Growth Amid Rising Costs

Shareholders of Conoil Plc recently smiled home from the company’s annual general meeting held in Uyo, Akwa Ibom State, following the payment of N694 million in dividends for the year ended December 31, 2012. The dividend translated to 100 kobo per share.

Although the dividend is less than the 250 kobo paid for the 2011 financial year, shareholders were highly pleased considering the reduced earnings of the company for 2012. A steep rise in financing cost and other operational expenses depressed the profit after tax (PAT) of Conoil in 2012 to N714 million, from N2.997 billion in 2011.

While profit before tax rose from N15 billion in 2011 to N16.2 billion in 2012, high financing cost, administrative and distribution expenses led to lower PAT for the year. Operation expenses stood at N15.492 billion in 2012, up from N10.922 billion. Financing cost accounted for 27 per cent or N4.2 billion. Specifically, financing cost rose 163 per cent from N1.6 billion to N4.2 billion in 2012.

However, despite the lowers bottom-line in 2012, directors ensured that the shareholders earn returns on their investments. Consequently, the 100 kobo dividend was recommended and approved at the AGM. Apart from going home with the 100 kobo, the shareholders also got words of assurance of a brighter future on the strength of a highly improved result for the half year ended June 30, 2013.

Speaking at the AGM, the Chairman of Conoil Plc, Mike Adenuga assured the shareholders and the investing public that the outlook and future of the company remained bright.

Adenuga reiterated that the company remained committed to maintaining its leadership position in the downstream petroleum sector by growing its business and creating an enduring value for its shareholders and other stakeholders.

“We are building stronger financial position and creating enduring value for our shareholders. We will constantly develop strategies to sustain our position as the only marketer that always goes the extra mile for our ever growing customers, with total commitment to excellent service delivery.

“We firmly believe that such a robust strategy will ensure continued growth and stronger position in our core markets”, Adenuga said.

Half-Year 2013 Results Already, the half year results have pointed to the promising fortunes of the oil marketing company and an enhanced shareholders’ value. Conoil recorded a whopping N1.98 billion as profit before tax against N663.1 million recorded in the corresponding half year period in 2012. PAT rose by 255 per cent from N450.9 million in 2012 to N1.6 billion in 2013, while earnings per share (EPS) increased significantly from 65 kobo to 230 kobo. The performance demonstrated the company’s resilience to overcome the overwhelming challenges in the downstream oil sector.

In achieving this improved bottom-line, the company made efforts to reduce administrative expenses and financing cost, which declined from N3.932 billion to N3.1 billion and N1.377 billion to N1.1 billion respectively.

The company attributed this sterling performance to the adoption of robust growth strategies, efficient management of resources and total elimination of waste in its operations.

Conoil assured its shareholders of its optimism to sustain and grow the impressive performance in the remaining six months of the year. It also assured juicier returns for shareholders at the end of the current financial year.

Revealing its edge, the company said it strengthened and repositioned its core businesses, with huge investments in retail network expansion, which involved building multi-million Naira mega stations across the country.

“For us, the downstream remains fundamentally attractive now, in the medium and long term. With our clarity of direction and focus, our company’s long term success is assured. We will sustain our improved performance and realise our aspiration to become the leading petroleum products marketer and one of the most profitable quoted companies. We will continue to benchmark our company against best global standards and practices to ensure that the business is managed in the best interest of all stake holders,” the company said.

Adenuga had said as part of the strategy to shore up its bottom-line, the company has strengthened and consolidated its leadership position in the aviation business with investment in the acquisition of new world-class equipment to meet the demands, on real time basis, of the company’s ever-growing local and international clientele.

“Our strategy in retail is to provide top quality products and services that will make customers want to always patronize us for their fuel and non-fuel needs. We are not resting on our oars on our aggressive acquisition and expansion drive that aims at increasing, substantially, the number of our retail outlets nationwide,” Adenuga added. According to him, Conoil’s future is rosy because the company is constantly thinking ahead and acquiring additional capacity that is necessary for growth and profitability, despite the unpredictability of the economic environment.

Governance and Structure Conoil Plc is owned by more than 189,000 shareholders and it’s quoted on the Nigerian Stock Exchange (NSE), where it trades as the highest-priced indigenous oil major. Incorporated in 1960, Conoil metamorphosed from the government-controlled National Oil and Chemical Marketing Plc, which was privatised in 2000. Conpetro Limited had acquired 60 per cent majority equity stake in 2000 and subsequently increased its shareholding to 74.40 per cent.

Conoil has benefitted from a stable board and management and growth-focused core investor. Adenuga chairs the Board of Directors while George K. George (Indian) leads the executive management team as managing director. The company has appropriate governance structures including board and management committees in compliance with Nigeria’s code of corporate governance for publicly quoted companies and international best practices.

Beyond compliance with laws and regulations, Conoil operates a more respectable corporate governance standard. While Adenuga’s Conpetro-as the core investor, provides strategic and technical supports to the company, he is said not to be receiving any emoluments. Also Conpetro charges no fees for the technical services, a situation analysts described as an uncommon noble stand in true spirit of core investor contrary to rampant practices, especially in the oil-marketing sector, where substantial funds are funneled to core investors, sometimes to the detriment of other shareholders.

Going Forward Against the background of global and national macroeconomic environments as well as industry-specific challenges, the performance of Conoil is commendable. With protracted reform and many lingering often-negative controversies, Nigerian downstream sector faces enormous challenges, indicated by industry-wide decline in margins and negative bottom-line growth by most companies.

Although the company has shown significant resilience on the face of challenges in the industry and posted an impressive half year in 2013, the company needs to devise ways of taming cost of sales.

Also continuing growth in sales and improving internal cost control should remain key strategies for Conoil. It also needs to reassess its financial balance to avoid a costly mismatch that can further unsettle mid-line cost management.

On-going growth initiatives including ambitious expansion into the West African market increase in storage, blending, distribution, retail and dispensing facilities and strong linkages and partnerships with other businesses provide reassurance on future growth prospects. Investments such as the 70,000 metric tonnes-55 million-fuel litres-per day new Port Harcourt Depot, 40,000-metric-tonnes-per-annum lubricant blending plant in Port Harcourt and 3,500 litres per minute dispensers for aviation fuel signpost such reassurance.

In all, Conoil’s commitment to long-term investments, supportive and farsighted board, dynamic management and sound local intelligence provide reasonable basis to assume competitive performance in the years ahead.


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