Engen, the third largest petroleum company, saw its balance sheet at half year being torn apart by high international crude oil prices and the weakening of the pula against major international currencies.
The company announced a turnover of P 407 million, or 33 percent increase, at the end of September this year but the figure was blighted by cost of sales which rose to P 365 million against P 256 million over the same period last year.
The results also impacted on net profits, which were down to P 31 million from P 34 million.
“Gross profits dropped as a result of significant increase in cost of sales, and this is attributable to the weakening of the Pula after devaluation and also as a result of the escalating global crude oil prices,” the company said in its results.
“ The current rise in crude oil prices reduced the positive effects of the stock valuation to a large extent.”
However, the company, whose business has largely been supported by the commercial sectorÔÇöespecially the minesÔÇö, said it is aggressively working on plans to increase its footprint in the retail section.
And, as such, it added that it had opened outlets in Tsabong and Lobatse and few others are still in the pipeline.
“I think that they are trying to diversify their earnings from the commercial sector by opening some new outlets,” Richard Mhango, an analyst at African Alliance Botswana said on Friday.
He also concurred with the company over the international fuel price hikes, which resulted in repeated fuel pump increases over the year.
“It is possible that they have suffered a lot from crude oil prices which have hit the retail sector,” he added.
“One of the things that affected their balance sheet is the receivables which are quite high. And at the end of their half year results government was still owing them,” Alphonse Ndzinge, an analyst at Investec Asset Management said.
The company praised the support that it got from the commercial sector saying that it lead to “good volumes and profitability” despite an intensive competitors waged by its competitors.
In the coming weeks, competition is expected to intensify on the commercial front as new mines in the north are positioning themselves to open.
DiamondEx, the Tswapong diamond mining company’s fuel tender is coming close and petroleum companies are already burning their mid night oil over it.
However, questions are being raised over the company’s valuation whose share price is running ahead of its earnings, which have slummed to 19.9 thebe from 21 thebe while share price is at 510 thebe.
