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Despite a plethora of challenges bedevilling the industry, Eterna Plc, is aiming to embark on a five-year plan which will reposition the company and scale up its presence in Nigeria’s downstream oil and gas sector.
Just like the last three years which have seen International Oil Companies (IOCs) and independent operators in Nigeria’s oil industry divest their assets either party or fully in the downstream sector; 2018 was another challenging year for listed companies in Nigeria’s downstream oil and gas sector.
In view of these challenges, Eterna’s chairman Shehu Dikko, announced to shareholders that the company is on course for a five-year strategic plan designed to take the company to higher levels of success.
“As part of executing the plan, we acquired 14 additional retail outlets in 2018. We are consistently measuring our performance against set targets and the board is providing the oversight to ensure that management delivers on the plans,” Dikko told shareholders at the last Annual General Meeting in Lagos.
The chairman noted that the company remains committed to making sure its operations positively impact communities which is why it keeps maintaining cordial relationships with all host communities including youth groups, women groups’ community development groups and paramount rulers of the communities.
Despite challenges, Eterna was able to pay a dividend of 25 kobo per ordinary share while the company also recorded a 45.57 per cent increase in revenue of N251.8 million in 2018 compared to N173 billion in 2017.
Also, due to high cost of doing business in Nigeria, unprecedented high cost of landing petroleum products and thinning margins on our product lines, gross profit declined by 27 per cent while Profit before Tax declined by 29 per cent to N1.9 million from N2.8 million reflective of the reduced margins and increased cost of operations.
Mahmud Tukur , Managing Director of Eterna Plc said the company is expanding its downstream operations despite Nigeria’s “challenging operating environment.”
Making a case for the company’s downstream business, the company boss said Eterna’s growth plan is based on a “longer-term vision” with the knowledge that actual profit margins are at the pumps or at the point of sale.
He said the company operates at high standards at par with the IOCs coupled with local knowledge of the operating environment, thereby giving it a competitive edge in its downstream operations.
“On this, let us first look at the rise of the super independents who have now become majors. We’ve seen new majors beyond the traditional Mobil, Total etc. Now the divestment is the fact that the operating environment is challenging but as a local operator, we know how to operate in this environment,” he said.
On deregulation, the Eterna Plc MD said market forces should determine the pump price of petrol as subsidy payments currently borne by government is not “sustainable”.
He said the incoming administration should announce full deregulation of the downstream sector when it comes into power on May 29.
The average net profit margin for the whole downstream sector declined industry average from 4.90percent in 2017 to 2.95percent in 2018, thanks to old perennial environmental, operational and regulatory challenges. These include poor governance and management of refining assets, huge debts/receivables on account of unpaid accumulated subsidy and unpaid interest, and foreign exchange differentials on product importation.
Stakeholders blame this negative performance on old perennial environmental, operational and regulatory challenges.
These include poor governance and management of refining assets, low operating margin for operators leading to low Return On Equity (ROE), huge debts/receivables on account of unpaid accumulated subsidy and unpaid interest, and foreign exchange differentials on product importation.
The partial removal of subsidy by government dealt a blow on earnings as many oil marketers couldn’t adjust to the new template of the regulator.
To correct this situation, oil marketers have urged the Federal Government to fully deregulate the downstream sub-sector of the oil and gas industry to preserve the country’s dwindling foreign reserves and enhance economic growth.
NNPC imports petrol at a landing cost of N171 per litre and sells at N145 per litre at filling stations. Importation of diesel was deregulated and this has created avenues for marketers to import and sell at competitive prices.
The marketers said the immediate removal of the fuel subsidy remained the best option to grow the oil sector; saying over N1.3 trillion was paid on subsidy with little or no benefits to the most vulnerable members of society.