Forte oil Plc in its audited financial statements for the year ended December 31, 2018 to the Nigerian Stock Exchange (NSE) recorded an increase in cost of operations that impacted negatively on profitability.
Despite reporting growth in revenue, the high cost operating environment, finance costs, total operating expense and cost of sales tow on the petroleum marketing profit in 2018.
The firm’s EPS for the equity shareholders stood at N1.45, a 48.8 per cent decrease compared to N2.85 of the preceding year.
Meanwhile, the management of Forte Oil has declared no dividend for the year ended December 31, 2018.
Interestingly, the company’s balance sheet dropped by 3.9 per cent to N141 billion as at December 31, 2018 from N147 billion in 2017.
The Company manufactures and distributes a wide range of lubricants foremost amongst them are the SUPER V and VISCO 2000 brands and has also obtained exclusive rights for the distribution of Chevron’s Havoline Motor Oils.
Forte oil sources high quality chemical products classed under industrial, organic and petro-chemicals, which it sells to local industries. These chemical products include: DOP, Polyol, Acetone, Calcium Hydrochloride, Isopropyl Alcohol etc.
Furthermore, the Company has embarked on providing solar energy solutions through its FO Solar brand which distributes low cost solar power solutions to domestic customers in line with the Company’s vision to become the foremost energy solutions provider.
Recently, the Chairman of Forte Oil Plc, Mr. Femi Otedola, has announced his decision to sell all his shares in the firm’s downstream business.
Forte Oil disclosed the divestment by its majority shareholder in a notice signed by its General Counsel, Mr. Akinleye Olagbende.
According to the notice on the Nigerian Stock Exchange, Securities and Exchange Commission, shareholders and the investing community stated that its majority shareholder, Mr. Femi Otedola, has reached an agreement with the Prudent Energy team, investing through Ignite Investments and Commodities Limited, to divest of his full 75 per cent direct and indirect shareholding in the company’s downstream business.
“Mr. Otedola’s divestment from the downstream business is pursuant to his decision to explore and maximize business opportunities in refining and petrochemicals.”
The transaction was expected to close in the first quarter of 2019 subject to the satisfaction of various conditions and receipt of applicable regulatory approvals.
Stronger revenue, weaker profitability
For the audited full year result and accounts of 2018, Forte Oil cost of sales increased by 62.1 per cent to N123.38 billion from N76.12 billion in prior year of 2017.
Cost of sales out grown revenue that rose by 56.3 per cent to N134.70 billion in 2018 from N86.17 billion in 2017.
This was driven by growth in the individual revenues of its Fuels business by 52.6 per cent to N123.1 billion from N78.8 billion recorded in 2017and Lubricants & Greases by 13.3 per cent to N13.7 billion from N12.1 billion compared to the preceding year.
The growth in cost of sales aided company’s 12.8 per cent increase in gross profit to N11.33 billion above N10.04 billion recorded in full year of 2017.
Consequently, the proportion of COS to revenue in 2018 review year stood at 91.6 per cent as against 88.3 per cent reported in 2017.
Forte Oil’s Non-core business income dropped by 3.8 per cent to N1.57 billion from N1.64 billion recorded in 2017.
However, total operating expenses (Opex) closed 2018 at N10.23 billion as against N9.05 billion recorded in 2017, representing an increase of about 25.3 per cent.
The breakdown of Forte Oil operating expenses include distribution expenses that increased by 36.5 per cent to N2.25 billion from N1.64 billion in 2017 while administrative expenses added 7.9 per cent to N7.98 billion from N7.40 billion recorded in 2017.
Finance cost significantly increased by 47.3 per cent from N3.04 billion to N2.06 billion in 2018 over interest on medium term bond and interest expense on bank loans and overdrafts while Finance income dropped by 18.4 per cent from N1.37 billion in 2017 to N1.12 billion in 2018.
The interplay between finance income and finance expenses bring about 178 per cent increase in net finance costs to N1.92 billion from N691 million posted in 2017.
However, profit before tax closed full year at N758 million, 61 per cent below from N1.95 billion reported in 2017.
With about 37.3 per cent reduction in tax expenses from N633 million to N397 million, profit after tax stood at N361 million, 72 per cent below N1.31 billion recorded in the erstwhile 12months audited results.
The firm had some discontinued operations (Forte Upstream Services, AP Oil and Gas Limited (APOG) and Amperion Power Distribution Company classed as Held for Sale) which realized a profit of N8 billion in 2018 compared to N10.9 billion the previous year.
This brought the total profit to N8.3 billion in full year result and accounts of 2018 as against N12.2 billion posted in 2017.
The underlying funda-mental of the company remained weaker in the year under review.
Furthermore, Gross profit margin moved from 11.7 per cent to 8.4 per cent while profit margin dropped from 2.3 per cent to 0.6 per cent in 2017.
Return on asset dropped to 0.5 per cent from 1.3 per cent while return on equity stood at 0.6 per cent in 2018 as against 1.3 per cent in 2017.
Financing Structure
The group’s non-current assets decreased by 84.4 per cent from N71.22 billion in 2017 to N11.14 billion in 2018, while current assets increased by 71.5 per cent to N130 billion from N76.09billion recorded in 2017.
On this, total assets decreased by 3.9 per cent to N141 billion in 2018 from N147 billion posted in 2017.
Total liabilities for the period under review also decreased by 15.2 per cent to N77.97 billion compared with N91.96 billion reported in 2017.
Forte Oil’s long-term liabilities declined by 67.8 per cent from N23.43 million to N7.54 million while current liabilities also increased by 2.8 per cent from N68.52 billion to N70.42 billion in audited 2018 results.
The downstream total equity however increased by 15 per cent to N63.57 billion in 2018 from N55.28 billion reported in 2017.
The proportion of equity funds to total assets, however, moved from 37.5 per cent to 44.9per cent while long-term liabilities/total assets decreased from 62.5 per cent to 55.1 per cent in 2018.
Liquidity position
The liquidity position of the Forte Oil remained flat in 2018 with positive working capital and high coverage for possible immediate liabilities.
Current ratio, which indicates ability of a company to meet emerging finance needs by relating current assets to relative current liabilities, remains flat at 1.9 times as against 1.1 times recorded in the erstwhile 12 months audited results.
SOURCE: ooeranews
