Cost, Weak Revenue Drive Eterna’s Loss to N1.1bn

Kayode Tokede

Weak revenue growth and a hike in operating cost got elevated Eterna Plc in its 2021 audited financial statement, creating a loss of over N1.1 billion for the petroleum marketing company listed on the Nigerian Exchange Limited (NGX).

The reported loss in 2021 is the second-worst performance of Eterna in five years and the audited result and accounts mark its worst performance in over a decade.

Eterna had reported N941.04million profit in 2021 despite drop in revenue as the management effectively managed its cost of production despite numerous challenges in the economy and severe competition from other petroleum marketing companies operating in the country.

Although revenue witnessed a significant increase in 2021 due to the increase in prices of Premium Motor Spirit (PMS), among other petroleum products, the performance is insignificant when the company reported N251.88billion in revenue in 2018.

The company in its 2021FY result and accounts said, “The global oil market has been pitched into turmoil by Russia’s invasion of Ukraine, with the US and Europe imposing penalties on Moscow and crude buyers shunning the country’s cargoes.

Brent had risen above $100 a barrel during this period to hit the highest since 2014. This has affected the prices of petroleum products in Nigeria with Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK) and Automotive Gas Oil (AGO) risen above the standard prices over the period.

“The increased in the prices of petroleum products due to the Russian invasion of Ukraine has affected our business by increasing the working capital requirements of the business and as well put more pressure on products sourcing. The immediate impact cannot be reliably estimated.”

The company in 2021 reported N82.2billion revenue, representing an increase of about 40per cent from N58.72billion in 2021, driven by 31.1per cent growth in retail & industrial sales.

Retail & industrial sales increase

Etern’s retail & industrial sales increased to N65.84billion in 2021 from N50.22billion in 2021, while sales from lubricants & chemicals rose by 104.02 per cent to N15.57billion in 2021 from N7.63billion reported in 2020.

The petroleum marketing company reported N1.08billion from its “Trading” activities in 2021 from N1.03billion in 2020.

From the profit & loss figures, Eterna announced N77.9billion cost of sales, representing an increase of 46.47 per cent from N53.21billion in 2021, attributable to N77.05billion material costs in 2021 from N52.32billion in 2020 amid inflationary pressure.

Other cost that impacted the company’s 2021 performance are General and administrative expenses that rose by 8.04 per cent to N4.2billion in 2021 from N3.9billion in 2021, while selling and Distribution expenses stood at N235.66million in 2021 from N142.12millio in 2021.

In total, expenses incurred by the company stood at N82.38billion in 2021, representing 43.9 per cent higher than N57.25billion reported in 2021.

However, the group reported 23 per cent drop in gross profit in 2021 to N4.26 billion compared to gross profit of N5.51 billion achieved in 2020.

Also, expansion in expenses drained the company’s Operating profit downward to N236.5million in 2021 from N1.52billion in 2020.

In the period under review, Eterna reported N9.09million finance income as against N29.4million in 2020, while finance cost grew by 18 per cent to N1.18billion in 2021 from N1billlion in 2020.

With the significant increase in expenses, the company closed 2021 financial year with N936.42millin loss before tax as against N548.15million reported in 2020.

The loss in 2021 impacted basic earning per share that dipped to a loss of 0.84kobo in 2021 from 0.72kobo in 2020.

Total liabilities outweighs total equity

Eterna’s total liabilities reached N33.96billion in 2021, representing an increase of 51.5per cent from N22.42billion in 2020, while total equity dropped to N12.12billion in 2021 from N13.35billion in 2020. This brings the company’s debt-to-equity to 2.80times in 2021 from 1.68times in 2020.

The company show its total borrowing increasing by nearly seven per cent to N21.12billion in 2021 from N12.5billion in 2020.

Eterna’s long-term loan facilities include Project Orion long term facility which is above 1 year and classified as long-term loan. Project Orion is a syndicated loan from consortium of banks for financing stations expansions with a base interest rate of 15per cent, the tenor of the loan is 5years was secured with a Security Trust Deed.

The loan in relation to Project Orion was liquidated the subsequent year. The group, however, closed 2021 financial year with N46.08billion total assets, representing 29 per cent increase from N35.77billion in 2020.

Gradual Recovery

The company recovered in its unaudited financial statement for third quarter (Q3) ended September 30, 2022, reporting N1.9billion profit before tax against N566.9million reported in Q3 2021, while profit after tax grew significantly by 246 per cent to N1.44billion in Q3 2022 from N416million in Q3 2021.

The growth in profits was driven by a significant increase in revenue to N91.9billion in Q3 2022 from N61.37billion reported in Q3 2021. Eterna benefited from the increase in petroleum products in the period as price of PMS or petrol increased to an average price of N179.42 in nine months of 2022 against an average price of N166.29 in the corresponding year of 2021, according to the National Bureau of Statistics (NBS).

The group reported N75.01billion in revenue from sales of PMS in Q3 2022 from N47.5billion in Q3 2021 as sales from Lubricants moved to N11.76billion in Q3 2022 from N11.66billion in Q3 2021.

Also contributing to the revenue drive was revenue from “Other” to N4.86billion in Q3 2022, representing an increase of 305per cent from N1.2billion reported in Q3 2021.

In the Q3 2022 under review, Eterna reported N85.7billion cost of sales, representing an increase of 50.25per cent from N57.05billion in Q3 2021 also driven by material cost and delivery cost.

The company closed Q3 2022 with N1.10 basis earnings per share from N0.32 in Q3 2021 on the backdrop of improved profit.

Delivering value to shareholders?

Speaking recently at the company’s Annual General Meeting (AGM), the company’s Chairman, Dr. Gabriel Ogbechie had noted that the goal was to be Africa’s preferred Energy Company while providing energy solutions that is efficient is still in full course.

“We will continue to focus on delivering value to our shareholders as we continue to drive the growth and profitability of our business,” Ogbechie stated.

According to him, the company would actively continue to play across the energy value chain covering the production, transportation, and distribution of energy solutions vital for economic growth and development.

“We will be the first choice for our customers as we seek to dominate the African energy industry by strategically expanding our operations and growing market share.”

Without expansion and improvement on its stations, analysts have expressed that Eterna might find it difficult to compete with the likes of TotalEnergies, Conoil Plc, among other unlisted companies on the bourse.

Eterna is not wholly controlled by any individual/Company/entity. However, Preline Limited holds 61.74per cent of the shareholding of Eterna and is represented by two directors out of the eight directors on the board.

The Company has two subsidiaries: Eterna Marine Services Limited and Eterna Industries Limited.