How Conoil overcame economic recession
That the Nigerian oil and gas industry is in dire strait is not in doubt. With the slump in global oil prices and declining oil output, Nigeria, Africa’s largest oil producer until a few months ago, slipped into recession after the country’s economy shrank by -2.06 per cent in the second quarter of 2016, following a 0.36 per cent contraction in the first quarter, according to the National Bureau of Statistics (NBS).
The recession hit the downstream petroleum sector of the economy hard, with rising cost of funds, liquidity squeeze and scarce foreign exchange combined to stifle operation and reduce the profitability level of many of the petroleum marketing companies.
The result is the gale of divestment by investors from the sector, following the exist of ExxonMobil, the world’s largest oil company by market value, which sold its 60 percent stake in Mobil Oil Nigeria, as well as Oando, which transferred its 60 per cent economic interest to Helios Investment Partners and Vitol group
However, amid the challenges, Conoil Plc, a prominent player in fuel marketing in the country, insists it is prepared and adequately equipped to weather the storm, to meet the energy needs of Nigerians as well as put smiles on the faces of its teeming shareholders with guaranteed returns on investments.
During 2015, when most companies in the downstream petroleum struggled to stay afloat in the face of downturn in the country’s economy, Conoil bucked the trend, with profits soaring by 125 per cent to N3.45 billion from N1.53 billion in the preceding year.
The company also consistently posted remarkable results in the first nine months of 2016, where profit before tax rose by 54 per cent to N2.72 billion over the N1.76 billion recorded in the corresponding period last year. Also, the profit after tax witnessed a similar trend with a sharp rise from N1.2 billion in 2015 to N1.81 billion this year.
In tune with its dividend payment history, Conoil paid its shareholders a dividend of N3.00 on every 50 kobo ordinary share for the 2015 financial year, compared to N1.00 paid the previous year, which industry watchers described as a promise kept by the company’ board to pursue strategies that will deliver growth in earnings and dividend to shareholders.
The Chairman the Conoil, Dr. Mike Adenuga, while addressing shareholders at the company’s 46th yearly general meeting in Lagos recently, assured investors of consistent annual returns on investment. “We would consolidate and ensure greater returns on the significant investments we made in 2015. In 2016, we would strive to maintain and improve the momentum, focusing more on delivery and growth.”
The management of Conoil attributed the strong performance in 2015 and in the first three quarters of this year to efficient management of resources, effective cost control policy as well as gains from its huge investment in the expansion and upgrade of its facilities.
“For us, the downstream sector remains fundamentally attractive and viable today and in the future. With our clarity of direction and focus, our company’s long-term success is assured. We will sustain this improved performance and vigorously pursue our aspiration to remain the nation’s leading petroleum products marketer and one of the most profitable quoted companies,” the company stated.
Indeed, Conoil’s state of the art facilities at its depots in Lagos and Port Harcourt give it unparalleled leverage in storage and blending of products, in conformity with the world’s best practice. The depots ensure availability and prompt delivery of products and services to customers nationwide.
As part of efforts to boost its bottom-line, Conoil has also repositioned its lubricants business, building two additional state-of-the-art oil blending plants in Lagos and another one in Port Harcourt, all of which the management said had pushed up its production capacity significantly.
There have also been massive investments in the retail segment. The company is currently upgrading about 400 filling stations across the country, while plans are on to acquire another 250 stations that would significantly boost its retail network.
For Conoil’s shareholders, the times may be hard, but they would at the same time, be rest assured that their investments in Conoil is safe and would continue to be rewarding. As declared by Adenuga: “With clarity of direction and focus, Conoil’s long term success is assured. We would sustain our improved performance and realise our aspiration to become the leading petroleum products marketer and one of the most profitable quoted companies in the country.”