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Japaul Oil and Maritime Services (JOM) Plc released its results yesterday showing total liabilities of N56.17 billion as at December 2017, exceeded total assets of N28.18 billion.
This resulted in a negative shareholders fund of N28.17 billion in the period under review.
Negative shareholder equity on a company’s balance sheet is a red flag that should prompt potential investors to take a closer look before committing their money.
Negative stockholders equity arises when a firm has been recording recurring losses throughout its existence and if symptoms persist could lead to bankruptcy. Japaul Oil has negative retained earnings of N49.18 billion.
For the year ended December 2017, the Maritime service firm recorded a loss after tax of N13.20 billion as against N21.01 billion loss recorded the previous year.
Sales dipped by 38.11 percent to N1.90 billion in the period under review as against N3.07 billion loss recorded the previous period.
The firm attributes weak sales to weak economic fundamentals that hit the oil and gas sector with its impact on the maritime industry.
A drop in oil price and a severe dollar shortage that hindered companies from importing raw materials and equipment to meet production saw the country slip into its first recession in 25 years.
However a rebound in crude oil price and production coupled with a favourable foreign exchange policy helped the country exit the recession in 2017.
The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017.
Japaul Oil’s total expenses of N8.41 billion is 4.4 times revenues recorded in the period under review, which resulted in operating loss of N1.79 billion.
The Maritime firm is highly geared or indebted as its capitalization ratio (ratio of total liabilities to total assets) increased to 200.06 percent in December 2017 as against 163.52 percent as at December 2016.
A high capitalization ratios or gearing level means the large chunk of the firm’s balance sheet is financed by via debt. In other words, the firm is exposed to financial risk as it will have to pay huge interest out of already battered earnings.
Japaul Oil’s finance costs or interest expense spiked by 118.01 percent to N4.61 billion in December 2017 from N2.11 billion as at December 2016.
The company’s share price gained 7.55 percent to close at 57 kobo per share while market capitalization stood at N3.57 billion.
Japaul Oil & Maritime Services Plc provides marine offshore construction, marine equipment leasing, and oilfield marine support services.
Japaul Mines and Products Limited, is a mining company whose quarries are located in Elegbeka, Ifon, Ondo State and Ibarakom Village, Forestry Road, Njagachang, Akampa, Cross Rivers State, Nigeria.
BALA AUGIE
