Mobil Oil Nigeria has experienced a windfall big enough to cause its profit to double in 2014. The oil marketer has already exceeded its 2013 full year profit figure at the end of the second quarter. It can be expected to attain a new profit high at the end of this year, as its recovery process gains momentum. Revenue growth is expected to be moderate but a big leap in profit margin has positioned the company to lead profit growth in the oil marketing group in the current year.
Mr. Adetunji Oyebanji, managing director/chief executive officer of Mobil Oil Nigeria, who is reckoned to be the highest paid chief executive among the major listed petroleum marketing companies in Nigeria, seems set to exercise the same superiority over competitors this year on some key performance numbers. These include earnings per share that is likely to rank second only to Nestle, profit margin that breaks out from the industry standard and exceptional growth in profit that is hardly matched anywhere else in the entire group of listed companies.
After tax profit amounted to N4.82 billion for Mobil Oil Nigeria at the end of the second quarter. This is a leap of 190.4% over the net profit figure of N1.66 billion the company posted in June 2013. Half year profit figure stands already above the full year profit figure of N3.48 billion the company posted at the end of 2013.
Based on the growth rate at the end of the second quarter, adjusted for the windfall that occurred in the first quarter, full year net profit is projected at N6.95 billion for Mobil Oil Nigeria in 2014. This will amount to doubling the net profit figure the company earned in the 2013 full year. This will be a major acceleration in profit growth from the improvement of 20.8% the company made last year.
Mobil Oil Nigeria is in the second year of profit recovery after it recorded profit drops in 2011 and 2012. Until the current year, the company’s profit peak has been the N3.89 billion it posted in 2010. Going by the second quarter interim reports, only two other oil marketers, Forte Oil and MRS Oil may be able to grow profit at all in the current financial year.
Mobil Oil’s outstanding profit performance this year is spurred by a windfall of N2.79 billion from other operating gains, which was absent in the corresponding period last year. This represents almost 58% of the net profit figure at the end of the second quarter.
Sales revenue grew moderately at 8.8% to N42.17 billion year-on-year at the end of the second quarter. This is a slow down from the first quarter figure of N22.41 billion. Based on the current growth rate, turnover is projected at N85.4 billion for Mobil Oil Nigeria at the end of 2014. This will be an improvement of 8.4% over the full year sales revenue figure of N78.74 billion in 2013. Sales revenue had declined in 2013 from N80.80 billion peak the company attained in 2012. Forte Oil is expected to lead sales revenue growth in the petroleum marketing group in 2014.
Apart from the windfall, the company also saved costs during the review period. Cost of sales grew at a lower pace of 7.6% to N36.56 billion than revenue and therefore moderated during the period. That permitted an increase of 17.4% in gross profit to N5.61 billion, improving gross profit margin from 12.3% in June last year to 13.3% this year. Distribution/administrative expenses also moderated slightly relative to revenue while other income rose by 19.2% to N1.24 billion and interest expenses dropped by more than 62%.
Net profit margin advanced from 4.3% in the corresponding period last year to 11.4% at the end of June. The company closed last year’s operations with a net profit margin of 4.4%. Mobil Oil Nigeria has been the leader of the oil marketing group on profit margin and has raised the margin of leadership considerably this year. Forte Oil follows at a distance with a net profit margin of 3.9% at the end of the second quarter; Total Nigeria comes next with 1.8%, Conoil ranks next with 1.3% and MRS 0.7%.
Mobil Oil Nigeria earned N13.36 per share at the end of the second quarter, rising from N4.60 in the second quarter of last year. Based on the projected net profit for the year, earnings per share is expected to come to N19.11 for the company in 2014. This will be double the N9.65 per share the company recorded in 2013. Total Nigeria had led earnings per share in the petroleum marketing sector last year with N15.67.
Major changes in the balance sheet over the first six months of the year include a drop of over 93.6% in cash and bank balances and an increase of 13.9% in trade debtors and other receivables to N6.05 billion. The company’s debt profile has not changed appreciably though much of its long-term borrowing has shifted to short-term liabilities.
Mobil Oil Nigeria faced adverse cash flow pressure during the review period with net cash generated from operating activities dropping by 68.4% to N1.44 billion. Management responded to the situation with a cut down on investing activities. Despite that, the net cash flow position was a decrease of N901 million against an increase of N538 million in the prior period.
Net assets per share rose from N26.49 in December to N33.86 in June. The company paid a dividend of N6.0 per share for its 2013 operations, representing a pay-out of 62.2%. Assuming the same pay-out for this year, a minimum dividend of N12 per share may be expected from Mobil Oil Nigeria at the end of 2014.