Background
MRS Oil Nigeria plc, a major player in the downstream Nigerian oil and gas industry, condensed interim financial statement for the half year 2013, shows a strong performance.
The company distributes and markets refined products and fuels, also blending lubricant and manufactures greases.
MRS was incorporated as Texaco Nigeria Limited (privately owned company) on August 12, 1969, and was converted to public limited liability company quoted on the Nigerian Stock Exchange in 1978, as a result of the Nigeria Enterprise Promotion Decree.
MRS has 254 million shares outstanding, with shareholder funds standing at N19.3 billion at the end of June 2013.
Financial performance for half year 2013
MRS reported gross income of N46.06 billion for the six-month period to June 2013, an increase of 21.1 percent Year-on-Year (YoY), from N38.2 billion as of half year (HY) 2012.
Premium motor spirit (PMS) sales, which make up to 75.6 percent of total revenue for the six month period to June 2013, rose by 25.5 percent (N34.9bn) from N27.8 billion in the corresponding period 2012.
Gross profit fell by 3.6 percent to N2.76 billion in June, 2013, as compared with N2.8 billion in the corresponding period of June 2012.
The slight contraction in gross profit is as a result of rise in the cost of sales by 22.2 percent to N43.3 billion in June, 2013 from N35.43 billion corresponding period of 2012.
It posted a profit before tax of N256.6 million half year ending June 2013, showing decrease of 4.2 percent, compared with N267.8 million in the corresponding period last year.
Profit after tax increased by 44.2 percent to N192.4 million in June, 2013 from N133.6 million in the corresponding period 2012. Income tax expense, which was based on management’s estimate of the weighted average income tax expected for the full year as stated in the condensed interim financial statement, shrank by 52.2 percent to N64.14 million June 2013, from N134.23 at year end 2012.
Administrative and distribution expenses rose to N2.6 million q-o-q in June, 2013 from N2.3 million in June 2012.
Earnings per share increased by 43.4 percnt to 76 kobo from 53 kobo in HY 2012. This was largely driven by the retail/commercial and industrial segment of MRS, which was the largest contributor to revenue across key indices.
The retail/commercial and industrial segment contributed 85 percent of turnover, 69 percent of gross profit, and 84 percent of profits before tax.
Trade and other receivables grew by 22.2 percent to N22.3 billion HY 2013, from N18.4 billion year end 2012. Trade receivables (Debtors), which make up 54 percent of total trade and other receivables, rose by 54 percent to N12.4 billion for HY 2013, from N3.4 billion year end 2012. The analysis reveals that discount should be given to customers to enable them pay more quickly and hence improve debtors collection.
Inventories increased by 30.2 percent to N5.6 billion for the period ended June 2013 as compared with N4.3 billion year end 2012. A break down of inventory as stated in the notes to the condensed financial statement shows that premium motor spirit (PMS) increased by 127.3 percent to N1.98 billion for six month to June 2013, as against N872.3 million in yearend 2012.
To reduce inventories; the company should adopt the Just in time (JIT) inventory system, which focuses on having the right quantity at the right time to prevent wastage of resources.
Cash and Cash equivalents reduced by 50 percent to N5.1 million in June 2013 compared with N10.1 million for year end in 2012. It shows the company is pursuing a conservative liquidity policy that avoids over-trading in its operations.
MRS property, plant and equipment, which represent 99 percent of total non-current asset, fell slightly by 2.3 percent to N 21.5 million compared with N22 million year end 2012.
Share performance and outlook
The stock closed trading at N34.26 per share on October 23, 2013, and currently has a price to sales ratio of 0.1.
It had a market capitalisation of N8.7 billion as October 23, 2013, while its shares have risen by 115 percent in the past year, compared with a 41.8 percent gain in the wider NSE All Share Index
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