By Nkiruka Nnorom

LAGOS— Despite its huge borrowings and high finance cost in the last two years, Oando Plc has assured its investors return to profitability.

Wale Tinubu

As at year ended December 31, 2015, the company’s total borrowings stood at N399.82 billion, which was down 16 per cent from N473.34 billion borrowed in the same period in 2014. The net finance cost for the period rose by N16 billion to N50.91 billion compared to N34.91 billion in 2014, while impairment of assets at

N13.368 billion was down 90 per cent from N134.54 billion in full year ended 2014. Loss before and after tax for the period stood at N51.14 billion and N49.69 billion in 2015 compared N137.98 billion and N145.66 billion posted in 2014 respectively.

Addressing stockbrokers at the company’s Facts Behind Figures on the Nigerian Stock Exchange, NSE, the Managing Director/CEO, Mr. Wale Tinubu, said the company is taking steps to right all that was wrong in its financials that resulted in low patronage of its shares by investors. “The market has punished us enough; we have experienced the worst decline in our share valuation in the market,” he said, adding that at N88.69 billion, the market capitalisation was far below its intrinsic value.

As at the close of transaction on Monday, July 4, 2016, the share price had fallen by 50.73 per cent to N7.73 from N15.69 a year earlier. However, on day-to-day basis, the share price rose by 10.16 per cent from N6.69 to N7.73.

Tinubu assured that the focus of the company was to create real value for shareholders, saying: “We faced challenges, we took the right decisions; we did not hide or pretend in our financials; we disclosed everything. What we are focusing on is trying to ensure that the market recognizes that our debt has gone down substantially, revenue streams are steady, we are able to service liability we have and generate a consistent quarterly returns and eventually drive our share price up to where we think it should be.

“We are confident of achieving this process; we are working on it and irrespective of our new reality today, which is $50 dollar oil price, foreign exchange volatility, oil production decline, service industry shrinkage and Niger Delta militancy, but with measures we have taken, we have ensured that the company is protected from the shocks of these challenges having dealt with the core impairments in 2014 and 2015 and on to a new start in 2016.”

Speaking on the debt position, Tinubu stated that the plan was to reduce the net debt to N100 billion from N501 billion in the next two months to September 2016, following a number of restructuring measures put in place by the Board and management to reposition the company for profitability.

He said already, the debt exposure has been reduced to N345 billion in the last 18 months it commenced the restructuring plan, while N105 billion has been injected into the business by way of equity and cash injection.

According to him, the company considers the reduction in its net debt position a significant milestone having paid off N400 billion worth of debt within the 18 month period and still maintained the same market share. Another thing that is significant to us is that we have paid off $500 million worth of debt from an upstream asset we acquired, he added.

He explained that as a result of poor financial performance in 2014 and 2015, the management initiated five pronged approach to resolving the financial problem after an impairment test was conducted on the company. He noted that the restructuring plan was 80 per cent completed, adding, “the only thing we are waiting for is conclusion of our gas transaction, which we expect to be completed before the end of this financial year.”

Outlining the measures being taken by the company, he said: “Basically, what we were forced to do was a five point programme. We were forced to first of all start economic interest divestment, raise as much capital as we could from our retail business to pay down our debt and eventually, we succeeded in raising over $60 billion dollars. We restructured all our debts in the company and put them into one facility and we have reduced interest from 24 per cent to 15 per cent. It was a very aggressive negotiation we had with over 11 banks and we reached a conclusion and we have signed up on that. This has reduced our cost of borrowing by close to 15 per cent.

“We have also converted a $150 million dollars of debt note to equity, which is approximately N45 billion which was converted. We already have cash and it is going to be converted to equity and it will increase our shareholders fund from N50 million to close to N100 million.”

The Oando boss explained that the company has completed a 100 per cent divestment from Oando Energy Services, OES, saying “we are focusing on the higher margin upstream in crude exploration and gas production, processing, distribution  and supply, as well as our Downstream retail and trading operations.”

Addressing stockbrokers at the company’s Facts Behind Figures on the Nigerian Stock Exchange, NSE, the Managing Director/CEO, Mr. Wale Tinubu, said the company is taking steps to right all that was wrong in its financials that resulted in low patronage of its shares by investors. “The market has punished us enough; we have experienced the worst decline in our share valuation in the market,” he said, adding that at N88.69 billion, the market capitalisation was far below its intrinsic value.

As at the close of transaction on Monday, July 4, 2016, the share price had fallen by 50.73 per cent to N7.73 from N15.69 a year earlier. However, on day-to-day basis, the share price rose by 10.16 per cent from N6.69 to N7.73.

Tinubu assured that the focus of the company was to create real value for shareholders, saying: “We faced challenges, we took the right decisions; we did not hide or pretend in our financials; we disclosed everything. What we are focusing on is trying to ensure that the market recognizes that our debt has gone down substantially, revenue streams are steady, we are able to service liability we have and generate a consistent quarterly returns and eventually drive our share price up to where we think it should be.

“We are confident of achieving this process; we are working on it and irrespective of our new reality today, which is $50 dollar oil price, foreign exchange volatility, oil production decline, service industry shrinkage and Niger Delta militancy, but with measures we have taken, we have ensured that the company is protected from the shocks of these challenges having dealt with the core impairments in 2014 and 2015 and on to a new start in 2016.”

Speaking on the debt position, Tinubu stated that the plan was to reduce the net debt to N100 billion from N501 billion in the next two months to September 2016, following a number of restructuring measures put in place by the Board and management to reposition the company for profitability.

He said already, the debt exposure has been reduced to N345 billion in the last 18 months it commenced the restructuring plan, while N105 billion has been injected into the business by way of equity and cash injection.

According to him, the company considers the reduction in its net debt position a significant milestone having paid off N400 billion worth of debt within the 18 month period and still maintained the same market share. Another thing that is significant to us is that we have paid off $500 million worth of debt from an upstream asset we acquired, he added.

He explained that as a result of poor financial performance in 2014 and 2015, the management initiated five pronged approach to resolving the financial problem after an impairment test was conducted on the company. He noted that the restructuring plan was 80 per cent completed, adding, “the only thing we are waiting for is conclusion of our gas transaction, which we expect to be completed before the end of this financial year.”

Outlining the measures being taken by the company, he said: “Basically, what we were forced to do was a five point programme. We were forced to first of all start economic interest divestment, raise as much capital as we could from our retail business to pay down our debt and eventually, we succeeded in raising over $60 billion dollars. We restructured all our debts in the company and put them into one facility and we have reduced interest from 24 per cent to 15 per cent. It was a very aggressive negotiation we had with over 11 banks and we reached a conclusion and we have signed up on that. This has reduced our cost of borrowing by close to 15 per cent.

“We have also converted a $150 million dollars of debt note to equity, which is approximately N45 billion which was converted. We already have cash and it is going to be converted to equity and it will increase our shareholders fund from N50 million to close to N100 million.”

The Oando boss explained that ‘the company has completed 100 per cent divestment from Oando Energy Services, OES, saying we are focusing on the higher margin upstream in crude exploration and gas, processing, distribution and supply, as well as our Downstream retail and trading operations.’