MOBIL records -9.01% decline in top line; FSDH recommends HOLD

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Thursday, October 10, 2013 12:27 PM  / FSDH Research

Strong Earnings From Efficiency Gains
The unaudited Q2 result of Mobil Oil Nigeria Plc, for the period ended June 30, 2013 shows that its Turnover (T/O) decreased by 9.01% to N38.74bn, compared with N42.58bn recorded in the corresponding period of 2012. Cost of sales decreased by 12.78% to N33.96bn from N38.94bn in Q2 2012, while administrative expenses increased marginally by 2.75% to N3.35bn. Also the company recorded a net finance charge of N26.36bn in Q2 2013 from a net finance charge of N68.36bn in 2012. This resulted to a Profit Before Tax (PBT) of N2.45bn, an increase of 73.46% from N1.41bn recorded in the corresponding period of 2012. The tax provision also increased by 72.87% to N792.63mn from N458.50mn. Profit After Tax (PAT) stood at N1.66bn in Q2 2013, up from N954.39mn in the corresponding period of 2012, representing an increase of 73.74%. The PBT Margin in Q2 2013 increased over the Q2 2012 and also increased over the Financial Year ended December (FY) 2012 figure. The PBT margin increased to 6.33% in Q2 2013 from 3.32% as at Q2 2012, and up from 5.05% as at the end of FY December 2012. PAT margin currently stands at 4.28%, up from 2.24% in the corresponding period of 2012, and up from 3.56% as at FY December, 2012. This result also indicates that the percentage of T/O, PBT, and PAT in the Q2 2013 to the Audited T/O, PBT and PAT for the period ended December 2012 are: 47.95%, 60.11% and 57.62%, respectively. Given the run rate, the company should surpass its previous year’s performance.

A cursory look at the balance sheet position as at Q2 2013 compared with the position as at FY December 2012 reveals a marginal decline in the company’s fixed assets. Fixed assets decreased by 0.45% to N8.87bn from N8.91bn in FY 2012, stock increased to N6.79bn from N5.70bn in FY December, 2012. Cash and bank balances grew significantly by 220.93% from N243.70mn in FY 2012, to N782.10mn in Q2 2013. Debtors and other receivables also increased significantly in Q2 2013 by 434.65% to N6.09bn from N1.14bn in the FY December 2012 period, while creditors and other payables increased by 19.91% to N11.11bn from N9.26bn as at FY 2012. Net assets for the period decreased marginally by 2.20% to stand at N6.45bn from N6.59bn in the FY 2012.

Drivers of Performance and Strategic Direction
Mobil Oil Nigeria Plc’s performance during the period was driven by the following factors: decline in the cost of sales and the reduction in net finance charges. Also, the performance was impacted by the upgrade of the company’s Blending Control Software and Automated Software in 2012, which has been providing Mobil greater efficiency in its blending operations and eliminating manual quality control processes in the Quality Assurance Laboratory. In order to optimize return from its property business, the company continues to restore the Mobil Court Residential complex to world-class standards. This investment which is expected to be completed in 2014 comes with a lease that will guarantee steady future market based income. Mobil’s research capabilities, affiliation with a strong parent company (ExxonMobil) and its involvement in corporate social responsibilities are major strengths of the company, while huge market size, possibility of the passage of the petroleum Industry Bill (PIB) and availability of local raw materials are some of the opportunities for the company.

Business
Mobil Oil Nigeria (MON) is one of the six major petroleum products marketers in the country. It currently has over 200 retail outlets located in all 36 states of Nigeria. MON is known in the industry for its ethics and adherence to safety, health and environmental standards. MON owns three plants located in Apapa, Lagos State, that manufacture lubes, petroleum jelly, and insecticide. Its ultra-modern lube oil plant, with a capacity of 450,000 barrels per annum is regarded as one of the most sophisticated in Africa. The company has continued to invest in fuel terminals, lube oil blending plant and property business.

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