High finance income together with profit from disposal of property, plant and equipment caused a growth in 11 Plc third quarter’s after tax earnings by 14 percent.
The financial result of the Nigeria Mobil fuel and lubricants distributor for the nine months (9M) ended September 2018 showed that the firm grew its revenue from petroleum products marketing by 42 percent to N125 billion from N88.2 billion in 9M’2017. Similarly, Profit after tax rose to N7.9 billion from N4.6 billion, representing 71 percent growth.
Highlights of the Q3 results showed that income from the sales of petroleum products grew by 22 percent to N39.2 billion year-on-year (YoY). The company reported more cost of sales by 26 percent from the figure reported in the prior year period.
During this period, PAT declined by 14 percent to N2.4 billion from N2.1 billion which was mainly supported by 2,713 percent profit in disposal of property, plant and equipment coupled with a huge growth in finance income by 22,527 percent. The company was also able to manage its cost as finance cost declined by 83 percent.
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The company showed improved operational efficiency in third quarter as expense -to- sales ratio dropped to 5.4 percent from 7 percent in the previous quarter. This implied that 5 percent of the company’s revenues are used for operating expenses and is viewed as a positive sign.
However gross margin for third quarter declined from the previous quarter (Q2) to 8.8 percent. This implied that the company retains 0.088k from each naira of revenue generated.
According to analysts at Investment One, “the drop in gross margin was weighed by higher landing costs of premium motor spirit (PMS), otherwise known as fuel. The higher landing costs reflected higher Brent prices witnessed during the quarter.”
From the company’s financial position total assets and total liabilities dropped 7 percent and 21 percent as compared with the figure recorded in December 2017 on trade repayment and trade creditors respectively. On the other hand, total equity grew by 18 percent.
Analysts at Investment One expect a growth in the cost to income ratio of the company in the next quarter, “given that crude oil prices are expected to climb higher when the US sanctions on Iran take full effect in November.”
“Nonetheless, the firm looks set to record a decent performance in full year 2018 as its nine month 2018 profit after tax has already surpassed that made in the full year 2017. Our target price on the counter, based on our last review, is N246.38, which is a buy.”
The company recorded an after tax earnings of N7.5 billion in full year 2017.
Nevertheless, the lubricants market in Nigeria is expected to grow at a great CAGR to over N405 billion ($1.1bn) in 2022 on account of increasing purchasing power of people and increasing demand for synthetic lubricants in the country, retrofitting of old ships to keep them operational along with the rising marine trade, rising prominence of the middle class in Nigeria and the consequent boost in vehicle sales, Analysts at Ken Research, Head Marketing stated in a press statement on Bloomberg.
“With an expanding industrial base and surges in population, the power demand will further increase, thus increasing the demand for lubricants, especially engine oils,” the analysts added.
The shares of the 11 Plc rose 0.86 percent to close at N176.50 at the close of market trade on October 30th.
11 Plc distributes commercial and retail fuels, lubricants, grease, heavy duty oil, motor spirit, diesel, and household kerosene. It also serves automotive, marine, aviation, and oil industries in Nigeria.
