By Andy Nssien
By Andy Nssien
Four years ago, Forte Oil Plc which is engaged in the marketing of refined petroleum products was in dire stress, posting negative results, which made shareholders and other stakeholders to grow grey hair. Now, the company which also manufactures and distributes a wide range of lubricants, appears to have staged a comeback, not just returning to profitability, but making shareholders in peer companies green with envy. These found expressions in a number of local and international awards and recognition in recent times, thanks to the three-year business transformation programme which was concluded last year
The effort was worth the candle as the major oil marketer witnessed a complete turnaround which saw the company emerging from a loss making to a profit oriented entity in the last three years.
Last year, the company’s revenue shot up by 33 per cent to N170.13 billion from N128 billion ; gross profit jumped by 51 per cent to N18.46 billion from N12.26 billion; while operating profit rose by 30 per cent to N8.14 billion from N6.27 billion achieved in the corresponding period in 2013.
However, the huge financial cost incurred, the 10 per cent devaluation of the Naira in 2014 coupled with harsh business environment had a telling effect on the profit-before tax of the company which decreased by 7.94 per cent to N6.01 billion when compared to N6.52 billion registered in 2013.
The company’s shareholders who were so excited with the N4.00 per share dividend approved for 2013 have to contend with the N2.50 per share dividend proposed for 2014. However, the owners of the company are being assuaged with a bonus of five new shares for every one already held.
One issue that has hamstrung the company’s operation in 2014 is the high overdraft and bank loans which shot up interest payment by 20 per cent to N953 million.
Further analyses of the company’s operations indicate that the present level of profitability is being threatened as reflected in the dwindling margins. For instance, the company’s Net Profit Margin dropped from 3.8 per cent in 2013 to 1.6 per cent, while Profit Before-tax Margin fell from 5.2 per cent in 2013 to 2.6 per cent in 2014.
The 2015 first quarter result recently released is no source of comfort either, as virtually all the outcomes are in the negative. Revenue generated during the period fell by 4.9 per cent to N33billion, profit before tax decreased by 33.7 per cent to N842 million, while profit after-tax shrank by 29 per cent to N782 million. Also, earnings per share dropped by 65 per cent from 0.75 to 0.26
Profit Before-tax Margin decreased from 3. 65 per cent to 2.5 per cent, while Net Profit After –tax Margin fell from 3.2 per cent to 2.3 per cent in the first quarter of this year when compared with the corresponding period in 2014.
Even so, the company can still pull chestnuts from fire during the remaining quarters of the year. It has to deal with the issue of bank overdraft which rose by 62 per cent to N26 billion in the first quarter, by exploring the option of equities.
The company’s recent diversification into the power sector through investment in Gerugu Power Plc which contributed more than 5 per cent to the revenue level last year, holds high hope for profitability as the business environment gets more friendly.
The dividend payout ratio which is a major attraction for investing in oil marketing companies needs to be beefed up to accord with those in the highest echelon in the sub-sector sector.
Forte Oil PLC (formerly African Petroleum) was incorporated on December 11, 1964 and later changed its status from a private limited liability company to a public liability company. In compliance with the provisions of the Nigerian Enterprises Promotion Decree of 1977, 40% of the company’s shares were sold to Nigerians and a year later, 60% was acquired by the Federal Government of Nigeria in favour of the Nigerian National Petroleum Corporation (NNPC) from British Petroleum. In November 1979 its name was changed to African Petroleum PLC. NNPC’s stake in AP was reduced by 20% in March 1989 after the Federal Government sold the above percentage to Nigerian Citizens, increasing their stake from 40% to 60%. In the year 2000, the Federal Government under its privatization programme divested its remaining 40% to core investors and interested Nigerians.
In May 2007, the shareholding structure took another dimension as Incorporated Trustees of NNPC’s Pension Fund divested its stake to Zenon Petroleum & Gas Limited, owned by Femi Otedola, making it the majority shareholder in the company. As a result, Mr. Otedola and his affiliated entities became the core investor in the company.
Under the new management, African Petroleum embarked on a rebranding and restructuring programme which led to a name change to Forte Oil PLC in December, 2010, and a rebranding of the retail outlets spread across the across the country.
Source : Independent