The petroleum giant, Engen Botswana Limited, raised concerns of rising costs that cancelled the better turnover recorded in this period even though the company managed to declare a dividend.
The results for the Botswana Stock Exchange (BSE) quoted outfit for the year ended March 31, 2011 saw turnover rising 22. 9 percent from P1.1 billion last year to P1.5 billion.
“Turnover increased by 22.9 percent, mainly owing to an increase in volume sales and fuel prices during the course of the year. Cost of sales also increased by 25.5 percent as a result of an increase in volume sales and basic fuel prices,” said a statement accompanying the results.
“Included in the cost of sales is the Tarlton Handling fees which increased by an astronomical 1, 001 percent,” the company added saying a margin adjustment granted by government later in the year did not fully offset the cost increase partly because the effective date was 6 months later than the effective date of cost increment.
Gross profit for the period was 7.9 percent better to P189, 6 million in 2011 compared to P175, 7 million last year while foreign exchange losses were minimal as they stood at P4.6 million compared to P7.3 million in the prior year.
The distribution and marketing expenses also went up because of the impact of dismantling charges reassessment on depreciation of P5. 4 million.
“Included in the transport expenses are the diseconomics of sourcing product outside of the gazzetted basis fuel price formula pricing model. The government has intervened by subsidising a significant part of this differential,” the company said.
Despite the cost challenges, the petroleum outfit managed to record an increase in net profit of 2 percent from P90.4 million to P92.3 million.
The profit before tax is up 3.1 percent from P117. 4 million last year to P121 million. Engen, which operates a number of filling stations around the country like its peers, was hit by uncontrollable supply challenges.
Botswana gets fuel from and through South Africa and when the supply chain is affected, it distabilises the country’s economy.
“The year was adversely affected by uncontrollable supply challenges,” Engen said.
Between, May 2010 and June 2010 Transnet employees in South Africa went on strike and later in the year from October when the product pipeline into Tarlton had to be derated for unplanned repairs.
“The pipeline disruption prompted government to release strategic stocks to the industry to avert a major fuel crisis over the festive period.”
“At the company level, alternative supply routes continue to be explored to ensure that the company’s network has continued supply of product.”
The company added that directors have declared a final dividend of 40 thebe per share which is a total cash of P64 million.
This is composed of the final dividend of 15 thebe per share and a special dividend of 25 thebe per share in respect of the 12 months ended 31 March 2011.
However, the company revealed that in compliance with the requirements of the Income Tax Act, withholding tax at the rate of 15 percent will be deducted by the company from all dividends.