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Forte Oil Plc: Impressive Corporate Governance

By Emeka Anaeto

FORTE Oil Plc, one of the Nigeria’s topmost indigenous major oil marketing companies, evolving from African Petroleum Plc and British Petroleum, has demonstrated again its impressive record of good corporate behaviour.

The timeliness and efficiency in its accounting, auditing and report renditions supported by strong business culture is clearly demonstrated by being the first amongst its peers and indeed amongst the big corporates in the Nigerian Stock Exchange, to announce full year results for the year ended December 2016.

The company’s results , however, indicated it is struggling with economic headwinds, though the top-line showed some resilience.

Revenue was up by 19.2 per cent to N148.6 billion. The partial deregulation of the down stream sector of the petroleum industry in the early second quarter of 2016 was expected to boost the top-line massively. At least, the almost 70 per cent increase in the retail price of its main product, petrol, should have delivered this expectation, coupled with the fact that product availability and stability have been sustained.

But then other economic factors began to play out. Industry reports indicated that volume sales have gone down considerably across all operators following the upwards adjustment in pump price coupled with the significant decline in purchasing power and level of economic activities in the economy.

As if to double down on top-line challenges cost push inflationary pressures and other management issues forced a 20.5 per cent rise in Forte Oils Cost of Sales, far ahead of inflation.

But the company still managed to maintain its head up with gross profit growing by 12.1 per cent to N20.6 billion while Distribution/ Admin expenses dropped -3 per cent to N13.3 billion

However the bottom-line was still under pressure, leading to a -23.8 per cent drop in pre-tax profit on the heels of over 155 per cent rise in finance cost.

Also with about 101 per cent rise in tax liabilities, the post-tax profit slumped by 50 per cent to N2.9 billion.

A breakdown of revenue shows petroleum products, lubes and power divisions grew by 17 per cent, 85 per cent and 26 per cent respectively whilst revenue in the production chemicals division fell by 33 per cent.

Gross margins remained unchanged at 10 per cent in the petroleum products whilst that of lubes and power declined to 27 per cent and 33 per cent from 35 per cent and 48 per cent in full year 2015.

However, Q4’16 standalone revenue (N27 billion) came in lower than Q3’16 level (N37 billion) and analysts believe the possible impact of the tight foreign exchange liquidity situation on product import volume as well as reduced demand following the price increases.


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