By Peter Egwuatu
The Board of Directors of Oando Plc may have concluded arrangement to list its marketing division (OML) on the Nigerian Stock Exchange (NSE)

Vanguard gathered from sources close to the company that plans have reached an advanced stage to list Oando Marketing division as a separate entity on the Exchange soon.

According to a source, “ The documents required for ratification to enable the division become a separate entity have been sent to relevant regulatory agencies for approval. Parties involved in the dealings have all been contacted and had given their consent.”

The listing, according to stockbrokers will make the Oando Marketing to be a separate entity from the Oando Plc as the Board has concluded to divest 49 per cent equity.

“The sale of up to 49 per cent of the Nigeria’s biggest fuel retailer is part of Oando’s plans to provide a platform that would make its marketing division very competitive with its competitors in the downstream sector and broaden investment options for its shareholders and investors” the source added.

By transforming into Oando Marketing (OML) Plc and subsequent listing on the NSE, the company would be left to stand alone at the stock exchange and would be assessed by investors and other market analysts on the basis of its fundamentals.

Furthermore, the implication of the listing would mean that subsequent performance of the company would now serve as the benchmark for those who want to invest in the company especially on the long term.

It is not the first time that companies would be splitting into different entities in the history of the Nigerian Capital Market. It is on record that UACN Property Development Company Plc (UPDC) operated first as a department, then as a division of UAC of Nigeria Plc until 1997 when the business was incorporated as a public limited liability company and listed on the NSE. The rest is now history as the company has turned out to be an investor delight at the exchange due to its performance.

However, just like UPDC which is now focusing its energies on the premium real estate market of carefully selected cities of Nigeria, Oando Marketing remained the leading retailer of petroleum products in Nigeria.
Oando Marketing, which is currently a fully owned subsidiary of Oando Plc sells and distribute one in every five litres of petroleum in Nigeria via over 550 retail outlets, and has operations across West Africa – Ghana, Togo, and Benin Republic.

A senior official of the company said: “As the nation’s leading oil retailer, with one in every five litres of petroleum products being sold or distributed, the company has continuously ensured products supply and availability in Nigeria and West Africa.”

In the 2009 Group financial result, Oando Marketing recorded sales in excess of N163 billion and posted profit of N5.8 billion. Indeed, the marketing business generates a cash flow of N500 million daily in sales and has been delivering profit yearly to the group.

Stockbrokers say Oando marketing has consistently reduced its operational costs whilst improving on administrative processes to impact positively on revenue generation and profitability improvement. They argued that the major players within the industry have not adopted the idea of business line diversification except Oando.

“Once sales are flat, most players in the industry have disappointing results all because of spiraling importation costs, strikes by petroleum workers, severe fuel shortages coupled with supply difficulties and the government not adhering to the agreement to pay the marketers their subsidies on time thereby enabling them to recoup their costs and engage in further importation of petroleum products,” observed analysts at Proshare Research.

The downstream petroleum industry is heavily regulated in Nigeria and this leads to tighter margins for petroleum marketers especially during rising crude prices. This appears to have informed marketers advocacy for the full deregulation of the downstream sector.

Stockbrokers are of the opinion that companies like Oando marketing would fare better in a deregulated market and reward shareholders accordingly. Indeed, a cross section of marketers has complained about the lack of a level playing field in the sector since Nigeria National Petroleum Corporation (NNPC), an agency of government also operates in the downstream sector with its mega filling stations and at a discount to the prevailing market price offered by other downstream players.

However, the listing of Oando Marketing is also believed to offer long term investment option to investors who want to maximize risks through diversification. For instance, as part of efforts to improve the overall efficiency of the industry and to lower product cost for the consume.