MRS Oil expects another high jump in profit to N4.4bn for Q4

MRS Oil Plc expects to hit the market with one of the most outstanding profit increases in 2023, with a bottom line target of N4.4 billion, according to the company’s forecast.

The energy company expects a stable final quarter earnings performance that will deliver an after-tax profit of N1 billion to top up its closing third quarter (Q3) bottom line of N3.4 billion.

The closing profit figure for the year will be another top-record growth of 238.5 percent from the N1.3 billion after-tax profit the company posted in 2022. It will also be a much-elevated profit delivery for the second year after the company multiplied its 2021 profit of about N340 million in 2022.

MRS Oil recovered from three years of running losses in 2021 and is expected to cheer shareholders with the biggest profit performance news in the upcoming earnings reporting season.

By the company’s final quarter earnings forecast, N154 billion or more than 60 percent of its full-year turnover will come from the closing quarter — to be driven by seasonal activities. That will jerk up the sales revenue of N100.9 billion at the end of Q3 to the region of N255 billion.

The final quarter is expected to account for N146.9 billion or 62 percent of the anticipated input cost of N237 billion for the full year, deliver N7 billion of the expected N18 billion gross profit and N1.8 billion of the targeted N6.8 billion operating profit for the year.

Selling and distribution expenses are expected to rise significantly in the final quarter.

The strong finishing for the year will expectedly cap a strong starting and sustained earnings momentum through the year.

The company built an after-tax profit of almost N1.5 billion in the first quarter (Q1) from a loss of N41.5 million in the same quarter in 2022 and grew the bottom line by a clear 112 percent in the second quarter (Q2) to N835 million.

In Q3, the bottom line expanded by 44.2 percent to N1.1 billion summing up to N3.4 billion at the end of Q3.

The company’s Q3 interim financial report at the end of September 2023 showed a sustained momentum for another breakout performance for the year.

It will be the third year of a high-speed recovery from three years of losses that ran up to 2020, summing up to N5.2 billion. Improving sales revenue, a general slowdown in costs and stretching margins constitute the upside functions for the company over the three years.

Sales revenue accelerated from 28 percent growth at half-year to 45.9 percent at the end of nine months of operations to close at N100.9 billion.

The cost of sales slowed down at an increase of 40.7 percent to N89.9 billion, which enabled gross profit to advance by 110.1 percent to N10.9 billion. The cost saving here and the strong gain in margin provided a key operating advantage for the company in the year.

Administrative costs reversed from a high-speed growth of 182 percent to N3.5 billion in the Q2 to a drop of 21.6 percent to N1.1 billion in Q3.

The Q3 drop slowed down the growth rate for the nine-month period from 123.6 percent at half-year to 65.4 percent to close at N6.1 billion at the end of September 2023.

There is a moderated increase of 17.1 percent in selling and distribution expenses to N320.7 million, which is further boosted by an increase of 55.7 percent in net impairment write back to N297 million.

The favourable cost-income combination lifted operating profit from N1.6 billion to almost N5 billion over the review period.

A strong increase in finance income combined with low finance cost to lower net finance cost from N62.9 million to N5.5 million over the period. The company’s borrowings are unchanged at N1.4 billion closing figure for the preceding financial year.

The company raised pre-tax profit from N1.4 billion to almost N5 billion and after-tax profit multiplied from N785 million to N3.4 billion over the review period.

Net profit margin improved from 1.1 percent in the same period last year to 3.4 percent at the end of Q3, down however from 3.9 percent at half-year.