Forte Oil Plc 9M'19 - Disposal Gain Continues To Mask Weak Operating Performance

Wednesday, October 30, 2019   /05:26PM  / By CardinalStone Research / Header Image Credit: Forte Oil Plc

Forte Oil Plc (FO: TP N22.01 ) released its 9M'19 earnings result earlier today, announcing EPS of N4.03/share during the nine month period (FY'19E: N4.88/share). 9M'19 performance was bolstered by gains from disposal of assets and interest proceeds from longstanding PMS subsidy receivables. The company noted that proceeds from longstanding receivables was also supported by naira devaluation

Some Positives:

• Q3'19 turnover grew by 23.6% YoY, driven by revenue increases in fuels (+23.1% YoY) and lubricants (+29.0% YoY) segments. We attribute the sharp improvement in topline to FO's increased retail footprint (+ 5.4% YTD increase in number of retail stations)
• Operational efficiency improved in Q3'19, evinced by the 10.7% decline in operating expenses. Contraction in personnel expenses (-23.5% YoY) as well as a significant dip in legal costs (-52.9% YoY) supported the performance on this front
• Net Interest expense also declined by 47.1% YoY in Q3'19, as drawdown on trade finance and overdrafts slowed during the period. In addition, the company paid off all its borrowings (loans and import finance facilities) bar a medium term loan which matures in 2021. Consequently, net debt contracted to N2.9 billion in 9M'19 from N6.0 billion in FY'18.

Some Concerns:

• Q3'19 gross margin declined by 2.2 ppts YoY to 6.26% in Q3'19, reflecting cost pressures in the fuels business ( cost of sales to sales ratio: 96.1% in Q3'19 vs 92.9% in Q3'18). In our view, this reflects the impact of the reported increase in PMS depot price to N117/litre from N113/litre in 2018
• Other income also declined by 42.1% YoY in Q3'19, as the firm recorded lower proceeds from freight and fuels storage service offerings. There was also no foreign exchange gain during the period (vs N92.5 million in Q3'18)

Related News

1.      FO Declares N5.26bn PAT in Q3 2019 Results; Revenue Grew by 30.3%,(SP:N15.90k)

2.     Forte Oil Notifies of Take-Over Offer from Ignite Investments and Commodities Limited

3.     Forte Oil Plc Announces Resolutions Passed at Its 40th AGM Held On Sept 03, 2019

4.     FO: Proposed Take Over By Ignite Investment and Commodities Limited Still Under Review By Regulators

5.     Forte Oil Plc Releases Document On Take Over Offer By Ignite Investments And Commodities Limited

6.     FO to Hold 40th AGM on September 3 2019

7.     FO Declares N5.45bn PAT in Q2 2019 Result,(SP:N18.30k)

8.     Forte Oil Plc Gets CAC Approval For The Extension of Time To Convene Its 40th AGM

9.     FO Appoints Oladeinde Nelson-Cole As Acting Company Secretary And General Counsel

10.  FO Notifies of the Company's Board Meeting and Closed Period

11.   Forte Oil Plc Notifies of the Resignation of the Company's General Counsel and Secretary

12.  FO Declares N650m PAT in Q1 2019 Results; Approves Special Dividend of N1.15 per Share (SP:N34.95k)

13.  FO Announces Resignation and Appointment of its Board of Directors

14.  Femi Otedola: From FO to Geregu

15.  Forte Oil Plc - Business Repositioning Signals New Dawn - May 17, 2019

16.  Forte Oil Plc Notifies Of Divestment and Sales Of Its Subsidiaries - May 04, 2019

17.  Forte Oil Plc Holds Extraordinary General Meeting On February 7th, 2019

18.  Forte Oil Denies Involvement With Skye Bank Insider Related Loans

19.  Forte Oil Plc: Will Planned Divestment Unlock Value?