Conoil: Operating Expenses Decline as Inflationary Pressure Drives Profit

By Kayode Tokede

Conoil Plc reported a marginal increase in revenue and a decline in total operating expenses that impacted positively its profits in audited financial year that ended December 31, 2022.

The 2022 financial year results showed a sustained performance in profit and loss figures and balance sheet from what the petroleum marketing company reported in 2021 full year results.

Conoil in 2022 reported N131.4billion revenue, a growth of about four per cent from N126.73billion in 2021.

The generated revenue is from sale of petroleum products in Nigeria at which white products contributed 92 per cent, while Lubricants contributed the remaining eight per cent.

The white products segment is involved in the sale of Premium Motor Spirit (PMS), Aviation Turbine Kerosene (ATK), Dual Purpose Kerosene (DPK), Low-pour Fuel Oil (LPFO) and Automotive Gasoline/grease Oil (AGO).

The products under the lubricants segment are Lubricants transport, Lubricants industrial, Greases, Process Oil and Bitumen. Products traded under LPG segment are Liquefied Petroleum Gas – Bulk, Liquefied Petroleum Gas – Packed, cylinders and valves.

The average retail price paid by consumers for Premium Motor Spirit (Petrol) for December 2022 was N206. 19 per litre, indicating a 24.38per cent increase when compared to the value recorded in December 2021 (N165. 77), while the average retail price of Automotive Gas Oil (Diesel) paid by consumers in December 2022 was N817.86 per litre, an increase of 182.64per cent from N289.37 per litre recorded in the corresponding month of the previous year.

In 2022, Conoil generated N120.37billion from white products as against N117billion in 2021, as revenue from lubricants closed 2022 at N11.06billion from N9.72billion reported in 2021.

Cost of Sales (CoS) stood at N117.42billion in 2022, an increase of 1.6 per cent from N115.56billion in 2021. Consequently, the proportion of CoS/Revenue dropped to 89.34 per cent in 2022 from 91.2per cent in 2021.

This positioned gross profit to N14billion in 2022, an increase of 25.5 per cent from N11.16billion reported in 2021.

In the year under review, white products contributed N12.48billion to gross profit as against N8.24billion in corresponding period of 2021, as gross profit from lubricants dropped to N1.53billion in 2022 from N2.92billion in 2021.

The petroleum marketing company, however, reported N6.55billion total operating expenses in 2022, a decline of 4.5 per cent from N6.86billion reported in 2021 despite inflationary pressure.

The company reported 4.17 per cent decline in distribution expenses to N2.29billion in 2022 from N2.39billion in 2021, driven 3.07per cent drop in Freight costs to N2.19billion. The petroleum marketing company also reported 4.71 per cent drop in administrative expenses to N4.26billion in 2022 from N4.47billion in 2021.

For the 2022 financial year, finance cost closed at N1.47 billion from N757.54million in 2021, attributable to hike in interest rate in the period under review.

Profit before tax hits N6.13 billion in 2022, an increase of 60.1 per cent from N3.83billion in 2021. Conoil paid a tax of N1.18 billion in 2022 from N749.07 million in 2021 to close the year with N4.96 billion profit as against N3.08billion profit generated in 2021.

With the significant increase in profit, the management proposed a dividend of N2.50 per ordinary 50kobo share to investors.

However, in financial year ended December 31, 2021, shareholders of Conoil received a dividend of N1.04 billion. The dividend, which translates to N1.50 kobo per share was recommended following the release of the audited results of the petroleum products marketing firm.

Oil marketing giant had announced a final dividend payment of N2.00 per ordinary share of 50 kobo each for the period ended December 31, 2019.

The underlined increase in profits positioned Basic earnings per share (kobo) to N7.14 in 2022 from N4.44 per share in 2021.

Conoil Trade and Other Receivables

Conoil in its audited result and accounts for 2022 increased to N65.91 billion, an increase of 22.1 per cent from N53.98 billion in 2021, driven by N50.98 billion trade and other receivables as against N34.21billion reported in 2021.

Total non-current assets dropped by 14.2 per cent to N3.69billion in 2022 from N4.3billion in 2021, while Total current assets that comprises of Trade and other receivables increased to N62.2billion in 2022 from N49.7 billion in 2021.

Total equity rose by nearly 15 per cent to N25.01billion in 2022 from N21.8billion in 2021, driven primarily by Retained earnings that crossed the N20billion mark to N20.84billion in 2022 from N17.62billion in 2021.

Also from the balance sheet position, Conoil reported N40.9 billion in 2022, an increase of 27.04 per cent from N322.19 billion in 2021.

Total non-current liabilities moved from N791.4million in 2021 to N751.87 million reported in 2022, while Total current liabilities about 277.85 per cent increase from N31.4billion in 2021 to N40.15billion reported in 2022.

Growth in 2022

The unaudited result and accounts of Conoil for period ended March 31, 2023 showed impressive growth in revenue, impacted by price adjustment in white products and significant increase in profits.

Conoil’s revenue from sale of white products and lubricant in Q1 2023 unaudited results grew by nearly 34 per cent to N34.97billion from N26.15billion reported in Q1 2022. The Cost of sales (CoS) rose by 24 per cent to N28.96 billion in Q1 2023 from N23.3billion reported in Q1 2022.

The company reported 8.8 per cent growth in total operating expenses to 1.999billion in Q1 2023 from N1.83billion in Q1 2022, driven by decline in distribution expenses.

Conoil reported 0.72 per cent decline in administration expenses to N1.28billion in Q1 2023 from N1.31billion in Q1 2022, while Distribution expenses that comprises of Freight costs and marketing expenses up by 37.34per cent to N713.48milllion in Q1 2023 from N519.5million in Q1 2022.

Finance costs for the period grew by eight per cent to N359.5million in Q1 2023 from N295.34million in Q1 2022.

Conoil closed the period under review with N.01billion profit as against N557.2million reported in Q1 2022.

Maintaining Leadership Position

Meanwhile, the management of Conoil reiterated its resolve to maintain its leadership position in the downstream petroleum sector by building a stronger financial position and creating higher values for its shareholders.

The company assured its shareholders that conscious efforts will be directed at achieving better execution of value-added products and services especially in the areas of marketing and customer management.

While noting the challenges ahead given the current state of the nation’s economy, it, however, expressed optimism that it would strive hard to maintain profitability.