WED 02 MARCH, 2022-theGBJournal- Ardova Plc a leading indigenous, integrated energy company in Nigeria published its Q4-21 unaudited financials recently, reporting loss per share of NGN2.35 in Q4-21 (vs loss per share of NGN0.02 in Q4-20) culminating in a 2021FY loss per share of NGN1.26 (vs earning per share of NGN1.42 in 2020FY).
The subpar performance in Q4-21 was driven by substantial increases in operating expenses (Q4-21: 76.1% y/y | 2021FY: 28.9% y/y) and net finance costs (Q4-21: 257.1% y/y | 2021FY: 164.8% y/y) influenced the loss per share recorded in the quarter and in 2021FY.
ARDOVA’s revenue in Q4-21 increased by 20.0% y/y to NGN64.49 billion, a stark contrast to the c. N45.00 billion average recorded in the first three quarters of the year, as the inclusion of Enyo in the company’s books, increase in demand from consumers for the festive season, and still relatively higher prices enhanced topline outturn. Segmental breakdown of the results indicates increases across its flagship fuels (+13.2% y/y) and lubricants and greases (+57.3% y/y) businesses.
On a q/q basis, revenue grew by 30.7%, supported by growth in the fuels (+29.4% q/q) and lubricants and greases (+6.4% q/q) segments.
Gross margin (-124bps) declined to 4.7% in Q4-21 (Q4-20: 5.9%) as the uptick in crude oil prices (Average Brent price: USD79.66/bbl in Q4-21 vs USD45.26/bbl in Q4-20) led to a faster increase in cost of sales (+21.6% y/y) than revenue (+20.0% y/y).
Stemming from the preceding and a 76.1% y/y increase in OPEX, ARDOVA’s operating profit turned negative for the first time in at least nine years. The substantial rise in OPEX was fueled by a 33.2% y/y increase in fuels freight and a 29.3% y/y increase in administrative expenses.
ARDOVA’s net finance charges increased significantly by 257.1% y/y, driven by a whopping 300.0% y/y increase in finance costs. The higher finance costs result from a surge in ARDOVA’s borrowings.
For context, total borrowings on ARDOVA’s books increased by 926.2% to N52.72 billion in 2021FY (vs NGN5.14 billion in 2020FY) as the company tapped the capital market and bank loans to finance its retail outlet expansion strategy and other capex costs.
Having factored in acquisition-related costs (N302.02 billion), ARDOVA recorded a loss before tax of N3.08 billion in Q4-21 (vs PBT of NGN484.72 million in Q4-20). Overall, ARDOVA recorded a loss after tax of NGN3.08 billion (vs loss after tax of NGN297.78 million in Q4-20).
ARDOVA’s Q4-21 aligned withCordros analysts expectations in their Q3-21 first glance report that the company will struggle to record positive earnings in Q4-21, though they say they did not envisage this level of underwhelming performance.
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