Eterna OiI Nigeria Plc’s full year profit more than doubled on the back of strong sales as the downstream oil and gas giant’s stock continues to attract investors.
The company’s improved margins, robust cash and cash equivalents and a stock price in an upward trajectory validates management’s focus and market penetration strategy.
Earnings before interest and taxation (EBIT) climbed to a record N5.82 billion, from N1.81 billion a year earlier, the Lagos based company said in a statement. Net income increased by 15.74 percent to N1.47 billion, beating the N1.27 billion average estimates of three analysts surveyed by BusinessDay.
Eterna oil’s share price closed at N3.21 as of Thursday April 13, valuing the company at N4.18 billion. YTD return was 9.35 percent, outperforming the NSE ASI of 0.05 percent the same day.
The impressive result was underpinned by a 16.08 percent increase in sales to N106.88 billion in the period under review from N92.06 billion the previous year.
Eterna oil is efficient and profitable as EBITA margin increased to 5.47 percent in the period under review from 1.97 percent the previous year.
Gross margins moved to 8.0 percent in December 2016 as against 2.34 percent as at December 2015
Analyst say the stellar performance was due to the hike in pump price of petroleum products by the Federal Government.
“The new price regime is boon to Eterna oil and other players in the downstream oil and gas sector as bottom lines (revenue) upsurge,” said an industry expert who doesn’t want his name mentioned.
Oil Minister Emmanuel Ibe Kachikwu announced last year that petrol stations could charge as much as N145 a litre gasoline, up from N86.5 before, a move that will help the government save money it had been spending on huge subsidy payment.
The minister said last year that if not for the subsidy removal, the country would be losing N16.40 billion monthly as payment to fuel importers.
Experts say money saved from the subsidy removal could be used to fund capital projects such as the construction of roads, hospitals and bridges.
Eterna oil is sitting on cash as ever.Its cash and cash equivalent stood at N7.11 billion as at December 31. That’s up from the previous figure of N1.84 billion.
The cash pile could be used to finance future expansion projects such as the construction of new gas stations, purchase of more tankers or the amount could be pumped used to fund research into the new products.
The cash balance helped the downstream oil and gas giant wipeout all of the N7.01 billion debt in the capital structure, resulting in a nil debt to equity ratio, a sign of sound financial health.
Eterna oil has deployed the resources of its owners in generating higher profit as the return on equity (ROE) moved to 13.85 percent in December 2016 from 12.88 percent as at December 2015.
Return on assets increased to 4.65 percent in December 2016 s against 4.14 percent as at December 2015.
Eterna oil and peer rivals should brace up for a tough 2017 as a combination of higher oil price and a weak currency could spike the landing costs of products thereby resulting in reduced profit.
BALA AUGIE
