Engen Botswana, the only petroleum company listed on the Botswana Stock Exchange (BSE), saw its balance being savagely torn apart by the international crude oil price spikes that dominated the best part of last year.
In its full year results to the end of April 2009 that were announced last week, the company said despite the swelling in revenues by nearly 40 percent to P 1. 286 billion against the prior period profit margins were hit severely.
Like-on-like profits collapsed to P 17.6 million against P 96.8 million largely blamed on the cost of crude oil which rose 61 percent to P 1.2 billion compared to P 753 million last year at the same period.
“Cost of sales increased by 61 percent to P 1 211 million (2008 P 753 million). The cost of sales has increased mainly as a result of crude prices that went up significantly until the third quarter of the year, and the crude oil stabilized in the last quarter of the year,” the company said.
Crude oil for the first time pushed through US $ 100 per barrel mark to US $ 147 per barrel that was blamed on a number of factors including the aggressive attitude of the former US President, George Bush. The US attacked Iraq ÔÇöthe third largest crude oil producer in the world — and at the same time was fighting an anti-terror was in Afghanistan.
The move resulted in repeated fuel pump increases in Botswana which also pushed inflation up to about 14 percent while the food prices also followed at much faster speed.
Engen said as a result of the difficult trading period, the tax man got a lot less this year (P 31 million) as a result of inventory losses that were valued at P 42 million against a gain of P 65 million in the previous year.
“The decrease has been as a result of inventory valuation loss of P 42 million compared to a gain of P 65 million. The inventory revaluation was mainly affected by the changes in crude oil prices,” Engen said in its report.
However, the company is confident about the future given that some of the mines that it supplies have now re-opened for mining activities. The mines are the biggest fuel consumers and their temporary closure has had an impact on its profitability.
But in its report, Engen Strategy, which was conceived in 2006 aimed at moving away from the mines to increasing its foot-print in the retail section, have paid dividend.
“The company continues to lead in the retail investment with the launch of the Corner Bakery at some of its new sites. The Corner Bakery will enhance the already strong Quickshop brand, and will be first of the Botswana market,” company said in its final financial results.
However, earning per share— the most reliable yardstick of measuring company’s performance was at 110 thebe against 60.6 thebe in the previous year. The company also declared dividend of 8 thebe by June 26.