Delayed subsidy Payments, leads to fall in Conoil Income

Conoil Nigeria Plc has succumbed to the delays in the payments of outstanding monies by governments as the company’s net income dropped 72.82 percent to end the 2014 financial year.

These delays have hindered most major petroleum oil marketers from importing products in the last two quarters of 2014 and earlier in the year as the banks were unable to finance LCs for importation due to the huge exposure to subsidy.

Conoil’s profit was N834.42 million in June 2015 as against N3.07 billion the previous year.

Sales were down 19.45 percent to N128.35 billion as the company continues to struggle with as PMS a major revenue driver were inadequate as a result of delayed subsidy payments.

Fuel marketers in Africa largest economy earlier in the year were in dispute with federal government over subsidy arrears amounting to $1 billion that caused crippling fuel shortages and nearly brought economic activities nearly ground to a halt.

The shortage left service stations closed, aircraft grounded, and businesses unable to operate.

Analysts say if the federal government continues to delay subsidy monies, the balance sheet of fuel marketers in Africa’s largest economy will continue to take a one or two punch due to dollar denominated debt in their capital structure.

Conoil’s debt to equity (D/E) ratio increased to 140.77 percent in June 2015, as against 65.66 percent last year.

The 140.77 percent D/E ratio means the company’s balance sheet is highly geared.

Finance costs were N2.30 billion in the period under review, representing a 2.50 percent increased from last year.

Conoil’s cost of sales margin was as high as 89 percent, leaving the major petroleum oil marketer with a low profit margin of 0.65 percent. Gross profit reduced by 19.0 percent to N13.78 billion in June 2015 compared with N17.03 billion last year.

In order to deepen its quality service delivery to leading domestic and domestic airlines operating in the nation’s airspace, the company placed orders for two new world-class, state-of-the-art bowsers.

The company said the new bowsers have combined storage capacity of 62,000 liters and the ability to refuel aircraft at 1,500 liters per minute.

Conoil’s total assets increased by 5.12 percent to N86.59 billion in June 2015 as against N82.37 billion in June 2014 while  shareholder’s fund reduced by 11.11 percent to N16.09 billion.

An analysts who doesn’t want his name mentioned said the non clear policies on economic matters by the new government such as the deregulation of the downstream sector and the Central Bank  cash tightening policies resulting in tight liquidity and huge interest rates will continue to dampen the performance of Conoil.

The company’s share price closed at N28.55 on the floor of the exchange while market capitalization stood at N20.58 billion.

BALA AUGIE