Mobil Nigeria Plc, a major player in a downstream oil and gas sector has recorded strong profit growth in the first quarter amid dollar shortages and tough operating environment undermining the performance of firms operating in the industry.
For the first three months through March 2016, Mobil oil’s net income increased by 22.20 percent to N1.81 billion as against N1.48 billion the previous year.
Sales followed the same upward trajectory as it moved by 34.45 percent to N22.68 billion as the company embarks on aggressive expansion with a view to consolidating its position in the market.
The company attributed the double digit growth at the top and bottom lines to its ability to import petroleum products in the first quarter which enabled it increase sales volumes.
Also, Mobil said it spent a lot of money on refurbishing properties in some choice areas and the value of the properties went up.
Since the removal of subsidy by the government of President Muhammadu Buhari few weeks ago, the share price of Mobil oil jumped by 12.90 percent to N175 as at 2:30 pm on the floor of the exchange.
Nigerians Minister of State for Petroleum, Emmauel Kachikwu announced the government’s decision to increase the price of gasoline by 67 percent to N145 ($0.73) per litre (0.26 gallon).
The deregulation of the downstream oil and gas sector was long overdue a fix price regime was discouraging investment in new refineries.
A higher fuel price will result in increased supply of products and create room for completion that will pave the way for price reduction.
Analysts and industry experts opined that the performance of major oil marketer in the subsequent quarters depends on the availability of dollars at N285 given the currency shortages that prevented importers from bring in products.
The Central Bank was forced to mandate importers to source dollars at the parallel market whose rate is roughly at N320. The naira is pegged at N197-N198 since March last year.
An industry expert who doesn’t want his name mentioned said with deregulation, there will be transparency and operators will have more money to bring in the product.
He said the downstream was so corrupt that some importers were doing “Bump Back” whereby fuel was pumped back into the ship and subsidy money were collected for purported importation of products not consumed.
With a flexible exchange rate embraced by the Monetary Policy Committee of Central Bank (MPC), analysts believe major marketers will record increased margins.
Further analysis of Mobil Oil’s financial statement showed net margins, a measure of profitability and efficiency to 7.98 percent in 2016 from 8.90 percent. Cost of sales moved by 39.70 percent to N18.86 billion while cost of sales ratio rose to 83.15 percent in 2016 from 81.81 percent in 2015.
This means the Nigerian major marketer is spending more to bring in on landing costs.
“From our analysis, we conclude that Nigeria is the least wealthy country globally (in terms of per-capita GDP) selling petrol at below $0.5/litre,” said Temilade Aduroja, an oil and gas analyst with Renaissance capital, in an email note to BusinessDay.
BALA AUGIE
