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Saturday, March 25, 2023

Conoil Petroleum Products Sales Lift Profit Margins to Five Year High

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There was increased demand for Conoil Nigeria Plc’s petroleum products that sent profit margins to five year high, thanks to the relaxation of lockdown measures by the government that kick-started the economy.

The growth in earnings is more than during the pre-pandemic levels as the complete liberalization of the downstream oil and gas industry, strict implementation of the Petroleum Industry Bills (PIB), and the coming on stream of Dangote Refinery are expected to make the sector attractive to foreign investors.

Conoil’s net profit margins increased to 1.57 percent as at June 2021, that is higher than 0.59 percent in 2020, 1.43 percent in 2019, 1.01 percent in 2018, and 0.59 percent in 2017, according to data gathered by MoneyCentral.

A strong margin means the management of the company generates enough profit from sales as they are capable of containing operating and overhead costs.

A cursory look at the financial statement shows net income surged by 213.17 percent to N1.06 billion in June 2021 from N338.69 million the previous year.

It is worth repeating that Conoil and peer rivals felt the pang of  the economic lockdown by the government to curb the spread of the coronavirus pandemic that undermined energy prices as airlines were grounded to a halt.

The gradual reopening of international flights and lifting the sit at home order led to a rebound in crude oil price that helped the country exit the recession in the fourth quarter of 2020.

Nigeria’s economy grew by 0.51 percent year on year (y/y) in the first quarter (Q1-21), higher than 0.11 percent recorded in the first quarter of (Q4) 20.

Interestingly, Conoil Nigeria has the financial strength to pay interest expenses there will be enough to cover administrative, distribution, and exceptional items.

For instance, times interest coverage ratio stood at 6.32 times operating income, which means operating income can cover finance cost 6.32 times.

The company doesn’t have too much debt in its capital structure, which means it is not susceptible to financial risk. It has the leeway to tap the dent market to raise funds to finance its expansion plans and to strengthen the working capital.

There are challenges that Conoil Nigeria have to surmount and make more money for shareholders. The foreign exchange scarcity has hindered oil marketers from importing the products, and that leaves the Nigerian National Petroleum Corporation (NNPC) the sole importer of the product.

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