Japaul Oil Q3 2020 Results: A Rebound in Profit, as Cost-Cutting Strategies Prove Effective

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Thursday, November 05, 2020/01:30 PM/ by TheAnalyst / Header Image Credit: Japaul Oil and Maritime Services plc

 

Japaul Oil and Maritime Services plc recorded a tremendous turnaround in its financial statements in Q3 2020, as it posted a profit before tax of N91.05m in Q3 2020 from a loss of N2.11bn in Q3 2019. The significant improvements in its profit before tax could be attributed to the significant decline in its administrative cost by -74.2% and the growth in other income by +16,314.25%.

 

In addition, it recorded an improvement in its shareholders' fund from negative equity of N37.65bn in Q3 2019 to N4.7bn in Q3 2020.


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Highlights

  • Revenue declined by -1.2% to N504.65m in Q3 2020.
  • Total Assets declined by -15.16% to N21.72bn in Q3 2020.
  • PBT grew by +104.32% from a loss of N2.11bn in Q3 2019 to N91.05m in Q3 2020.
  • Equity increased by +112.7% to N4.7bn in Q3 2020.

 

Profit Takes a New Twist

 

PBT

Japaul Oil and Maritime Services plc reported a loss before tax consistently from Q3 2015 to Q3 2019. In Q3 2020, it recorded a significant improvement in its profit before tax. Its profit before tax recorded a turnaround from a loss of N2.11bn in Q3 2019 to a profit of N91.05m in Q3 2020. The rise in profit before tax could be attributed to the rise in other income and the significant decline in its administrative cost. Its other income rose by +16,314.35% from N3m in Q3 2019 to N493.09m in Q3 2020. Its major source of "other income" was from sundry income while its administrative cost declined significantly by -74.2% from N2.37bn in Q3 2019 to N611.4m in Q3 2020 (see Chart 1).

 

 

Chart 1: Japaul Oil and Maritime Services Plc PBT (N'm)

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Source: Japaul Oil and Maritime Services Plc Financial Statement, Proshare Research

 

Revenue

It recorded a decline in its revenue in Q3 2020. Its revenue declined Y-o-Y from N510.76m in Q3 2019 to N504.65m in Q3 2020. A further breakdown of the revenue data shows that it recorded an increase in revenue from dredging and quarry by +72.23% and +20.7% respectively while it recorded a significant decline in revenue from offshore activities which caused the decline in revenue for Q3 2020. It recorded a decline in offshore activities by -19.05% in Q3 2019. The revenue from offshore activities declined from N363.8m in Q3 2020 to N294.5m in Q3 2020 (see Chart 2).

 

Chart 2: Japaul Oil and Maritime Services Plc Revenue (N'm)

 

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Source: Japaul Oil and Maritime Services Plc Financial Statement, Proshare Research

 


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Positive Shareholder Funds: A Breath of Fresh Air

 

Shareholder Funds

Japaul Oil and Maritime services plc had been recording negative equity from Q3 2016 and it was able to turn around this tide in Q3 2020. Its shareholder's fund recorded a remarkable improvement in Q3 2020 as it grew by +112.7%. Its shareholder funds improved from a negative N37.65bn in Q3 2019 to N4.78bn in Q3 2020 (see Chart 3).

 

Chart 3: Japaul Oil and Maritime Services Plc Shareholder Funds (N'm)

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Source: Japaul Oil and Maritime Services Plc Financial Statement, Proshare Research

 


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Cost; Fighting the High and Mighty

It recorded its lowest administrative cost in Q3 2020 when compared with other years in the same quarter.  The sharp decline in administrative cost by -74.2% had a positive effect on the profit before tax. Administrative cost declined from N2.37bn in Q3 2019 to N611.4m in Q3 2020 (see Chart 4).

 

Chart 4: Japaul Oil and Maritime Services Plc Administrative Cost (N'm)

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Source: Japaul Oil and Maritime Services Plc Financial Statement, Proshare Research



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Current Ratio

Its current ratio improved from 0.17 points in Q3 2019 to 0.93 points in Q3 2020.  This implies that Japaul oil & maritime services have 0.93kobo of current assets for every N1 of current liabilities (see Chart 5).

 

Chart 5: Japaul Oil and Maritime Services Plc Current Ratio

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Source: Japaul Oil and Maritime Services Plc Financial Statement, Proshare Research

 

A New Business Model - A Switch to Mining

In a bid to bolster profit growth, Japaul Oil & Maritime Services Plc announced plans to exit the oil industry after a protracted downturn and raise N27bn in share offer in November to fund its switch to mining as crude exploration and production activities wane.

 

Japaul is working with Toronto-based Matrix Geotechnologies Ltd as the consultant for its operations and has obtained licenses to mine gold, lead, nickel, and copper it identified in commercial quantities in different parts of Nigeria. The company also wants to acquire smaller companies that already have licenses for those minerals to boost its production.



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