MRS Oil misses mark on revenue but beats full-year profit target at N4.9bn

MRS Oil’s final quarter sales revenue is far off the high mark set for the quarter but the bottom line is surprisingly better than expected.

The company’s final quarter delivered N81.4 billion sales revenue, well below the forecast figure of N154 billion for the quarter.

Despite the significant revenue shortfall, the energy company closed the year with an after-tax profit of N4.9 billion, beating the year’s target of N4.4 billion, according to the company’s yet to be audited 2023 full-year financial report.

The final quarter earnings forecast had raised high hopes of generating more than 60 percent of the company’s full-year turnover from the closing quarter — which was expected to jerk up sales revenue of N100.9 billion at the end of the third quarter (Q3) to the region of N255 billion.

That failed to be realised.

Yet, the company is reporting one of the most outstanding profit improvements in 2023 with a leap of 272 percent in the bottom line from N1.3 billion in 2022 to N4.9 billion.

The final quarter delivered an after-tax profit of N1.4 billion against the N1 billion forecast for the quarter. The difference between the missed sales target and better than expected bottom line is a tax credit of N817 million for the quarter.

With lost sales, other key operating numbers were equally missed: gross profit for the quarter amounted to N3.7 billion — slightly over one-half of the N7 billion target and operating profit stood at N645 million compared to N1.8 billion targeted for the quarter.

Profit was headed for a big underperformance in the final quarter except for the tax saving that changed the earnings story for the period.

Other cost savings in the quarter helped to manage the instability created by missed sales target. They include a drop of 38.4 percent in selling and distribution cost to N396 million and a drop of 7.4 percent in impairment loss on financial assets.

Also, net finance cost went down from N17.8 million to N8.2 million during the quarter owing to a strong growth in finance income.

Despite the challenges in the final quarter, MRS Oil has seen a much-elevated profit delivery for the second year as we had expected, having multiplied after-tax profit close to four times in 2022.

Since the company recovered from running losses in 2021, it is cheering shareholders with major profit elevation for the second year.

Sales revenue for the full year amounted to N182.3 billion, an increase of 80.9 percent from N100.8 billion turnover recorded in 2022. The figure is N72 billion short of the targeted full-year sales revenue in the region of N255 billion.

Cost of sales grew by 81.9 percent to N167.7 billion, while gross profit rose by 70.2 percent to N14.6 billion.

Administrative cost slowed down at an increase of 63.3 percent to N8.3 billion, while selling and distribution expenses went down by 21.8 percent to N716.8 million. Also, impairment loss on financial assets dropped by 45.7 percent to stand at N168.9 million.

The cost savings strengthened operating profit, which grew by 124.4 percent to close at N5.6 billion for the year.

Further strength came from an outstanding increase in finance income against relatively low finance cost — which saw a sharp drop in net finance cost from N80.7 million to N13.6 million in the year.

The company’s borrowings remain unchanged at N1.4 billion closing figure for the preceding financial year.

At N5.6 billion, the company’s pre-tax profit for the full year is up by 131.2 percent, but measures below the full-year target of N6.5 billion.

The huge tax saving in the final quarter enabled a much stronger growth of 272.9 percent in after-tax profit by cutting tax expenses from N1.5 billion at the end of Q3 to N698.7 million at full-year and also from N1.1 billion in 2022.