Conoil PLC

Conoil: Leveraging on strategic investments to grow shareholder value

2010-Oct-12
For the oil and gas industry, the year 2009 was a particularly difficult one. This was due to the uncertain business environment that prevailed then, coupled with concerns over the impending reforms which expectedly will affect the structure and processes of the sector. The years ahead portend even greater challenges and demand pragmatism on the part of the players in the industry.

As the stakeholders await the pending reforms with cautious optimism, the major players in the industry are gearing up for the anticipated challenges and opportunities that the new order is expected to usher in. Leading these repositioning moves is Conoil Plc, a prominent player in fuel marketing in the country, which has flagged off various projects and initiatives which industry watchers believe will help the company capitalise and reinforce its strong position to deliver profitable growth. It has stepped up investments in the core segments of the downstream business with a view to consolidating its competitive edge and breaking new grounds to further boost its market share.

The strategic investment project entails upgrading and construction of facilities in the priority areas, such as retail, lubricants, aviation and specialized products, so as to provide additional capacity that will enable it to meet the long-term needs of its growing business. According to a statement by the management, the focus of the current initiative is to deepen the company’s market penetration and establish new streams of income to further strengthen its competitive edge. Chairman of the company, Dr. Mike Adenuga, had consistently expressed the determination to sustain the culture of taking advantage of opportunities in the emerging markets and organizing efforts and resources along enduring strategies for top performance. “There is an ongoing review of our business processes to boost commercial, innovation and supply chain efficiencies, to improve focus on growth opportunities and to enhance competencies that will drive accelerated progress,” he said in his message to shareholders in the company’s 2009 annual report obtained by our correspondent.

The company had recently announced the Board of Directors’ proposal of N1,040,928,000 dividend in respect of the year ended December 31, 2009. Going by the proposed dividend, which will be tabled for approval at the company’s 40th annual general meeting in Ibadan on October 22, shareholders will get N1.50 on every 50 kobo ordinary share, which translates into 50% increase over what was paid in 2008. The audited financial report shows that it posted N3.8 billion profit before tax (PBT) in 2009, an increase of 15 per cent over the N3.3 billion recorded in the previous year. Profit after tax also shot up by 27 per cent, from N1.8 billion in 2008 to N2.3 billion, while its net assets rose from N11.9 billion to N13.5 billion. Earnings per share also moved up to N3.3 from N2.62 in 2008.

Explaining the renewed drive to shore up the company’s bottom-line, the statement said it was aimed at upgrading facilities and building modern infrastructures in depots located in strategic parts of the country, with a view to taking full advantage of the emerging markets in the industry. One major component of the expansion initiative is the construction of a massive depot in Port Harcourt, Rivers State, which is meant to complement its flagship depot in Apapa, Lagos. Located near the free port zone of Onne, the ultramodern facility, which cost about N12 billion, will provide easy access to fuel imports and ease the current pressure on available jetties and other port infrastructures in Lagos.

The complex is said to have a storage capacity capable of holding 70,000 metric tonnes of all products namely, Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), ATK (aviation fuel), kerosene and bitumen. The huge storage capacity, it was learnt, would enable the supply of 55 million litres of fuel per day, delivering 300 trucks on a daily basis.

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 Apapa and another one in Port Harcourt, all of which the management said had pushed up its production capacity significantly. The company is also introducing into the market, a new brand of engine oil called Okada Golden Super which is manufactured specially for 4-stroke motorcycles and tricycles.

If there is one segment of the downstream that deregulation has proved to be successful, it is the lubricant business. Indeed, the post deregulation era has ushered in new and innovative ideas, closer cooperation with world-renowned additive manufacturers, specification bodies as well as original equipment manufacturers. According to Conoil, lubricants hold a very unique position in its business. “Our flagship lubricants, the Quatro and Golden Super Motor Oil (GSMO), are specially formulated to meet the needs of all categories of Nigerian motorists. They have become the favourite of mechanics and are dominant features in mechanic garages. The Quatro brand carries the Donut symbol of the American Petroleum Institute (API), which is the globally accepted symbol for top quality engine oil of international standard.”

In addition, Conoil has also introduced Quatro Gazol, a lubricant specially formulated to service gas-operated automobile and industrial machines. It is the first to be produced in Nigeria by an indigenous oil company. With the Federal Government’s focus on increasing domestic gas utilisation through exploring and encouraging additional domestic gas projects and market, Gazol was therefore introduced to capture that market which is expected to blossom in the nearest future. Already, it is the toast of major industries in Lagos, Aba, Warri, Sango/Otta in Ogun state and Port Harcourt, that run on gas.

The company is also consolidating its stronghold on the aviation fuel marketing business in terms of spread, storage capacity and maintenance support. The company is optimistic that in the coming months, it would be doing more volumes, raking in more profit thereby increasing the bottom-line. “Major airlines plying the Nigerian airspace have been flocking to us to take full advantage of the unique services. Our impressive storage facilities give us unmatched capacity to meet the needs of local and international customers. Our hi-tech bowsers as well as quality product and service delivery, which are of essence in the industry, are some of the reasons the company continues to attract the best of clientele in that sector. Investments made by Conoil to reinforce its foothold in the aviation fuel marketing segment of the downstream petroleum industry are yielding desired results, as the company has won major contracts for the supply of Jet A1 to five international airlines operating in Nigeria,” the statement said

There have also been massive investments in the retail segment. The company is currently upgrading over 300 filling stations across the country, while plans are on to acquire another 250 stations that would significantly boost its retail network. Besides the ongoing project of building one mega station in each state capital, it has sustained its special university campus scheme, under which retail outlets are being located on the campuses of designated universities and polytechnics across the country.

On the company’s expansion agenda, a statement issued by the management said: “We are determined to continue to make our shareholders and customers happy. So, we are boosting our product portfolios and logistics, expanding our retail network across the country and revamping the Non Fuel Retail business to boost our income.

Chairman of the company, Dr. Mike Adenuga, had consistently expressed the determination to sustain the culture of efficiency, by making conscious efforts to achieve better execution, especially in the areas of financial discipline as well as marketing and customer management. He forecast tough times ahead, but expressed confidence that the prospects of Conoil’s business remained strong.

“Competition in the industry is increasing and likely to become even more intense. However, we are confident in our ability to meet the challenges and make optimum use of any available opportunities for growth. The company will focus on expanding its strong business position through continued emphasis on strategic investments, product and service quality, and development of human resources. Deliberate efforts will be made to optimise costs to strengthen the company’s financial base and competitive edge,” he added.
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