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11th April, 2008

Oando delivers 126% full year profit growth

Oando Plc, which has a primary listing on the Nigerian Stock Exchange and a secondary listing on the JSE Limited (JSE) reports Group Profit After Tax (PAT) for the financial year ended 31 December 2007 of $50m, an increase of 126% over the prior year when the Company made PAT of $22m.

Financial Indicators

• Gross Profit grew to $173m in 2007 from $131m in 2006
• Gross Profit Margin increases to 11.5% in 2007 from 9% in 2006
• Operating Profit of $64m in 2007 from $47m in 2006
• Profit Attributable to Shareholders up 157% to $43m from $19m
• Adjusted earnings per Share increased from to 3.37c in 2006 to 6.94c in 2007

Operational highlights

• Improved performance of all our business lines, especially supply and trading business division
• Improved balance sheet management
• Corporate restructuring concluded
• An evolving visible presence in the upstream oil service segment with the recent acquisition of 2 oil rigs
• Integration of our business processes following the successful conclusion and roll-out of the various  modules of our Enterprise Resource Planning system

• Continuous market and product development to improve the bottom-line and diversify income base

Oando CEO Wale Tinubu said the group’s 2007 results show that the company’s long term goal of fortifying its non-marketing business is yielding results. “We shall continue to emphasise higher value business segments in order to generate higher margins from our business lines. We have therefore made huge capital commitments in our Exploration and Production business segment.” Tinubu said the returns on this investment are expected to boost the Group’s profitability and take Oando closer towards its strategic goal of being the leading integrated energy solutions provider in Africa.

While the underlying businesses all performed at or above prior year levels, the consolidated numbers are lower due to the higher level of inter-company activities. The Group turnover was 9% lower at $1.5 billion, from $1.64 billion in 2006. instability during the second quarter of the year; a hike in the pump price of major petroleum products led to industrial and general strike actions which in turn crippled economic activities. This was further aggravated by the several labour-work hours lost during public holidays declared to enable voting and mark Nigeria’s transition to a new democratic government.

Despite reduced turnover, the Group’s Gross profit increased by 23% compared to the previous year. This was due to improved margin efficiency as gross profit margin was 11.5% compared to 9% in 2006, as strategic efforts to enhance operational efficiency yielded rapid results.

Our operating profit also show an improvement of 36% from $47m to $64m in 2007. This, in addition to improved margin efficiency, is largely attributable to the increase in our non-fuel revenue income, coupled with efficient management of debt. 

Also beneficial to our improved results was the reduction in finance costs by 75%, from $12m in the previous year to $3m in 2007. Oando negotiated better terms with creditors and improved working capital management. Improved debt restructuring and alternative finance sources also contributed to reduced finance costs.

The Gas business was affected by the maintenance of the gas pipelines which constrained gas supply during the year. The anticipated completion of the ongoing pipeline expansion in Lagos could not be met due to delays in the arrival of acquired pipe as well as a logistics logjam, thus reducing the accruable revenue income from existing and potential customers.

The Supply and Trading division was able to utilise expertise garnered over the years to bridge gaps that opened up in the supply chain, thereby delivering results well above the previous year’s level.

The successful roll-out of the Oracle Enterprise Resource Planning system is expected to boost business activities by integrating business processes and ensuring real time monitoring of operations.

Prospects

Our Supply and Trading business is expected to build on the strong base it has set in 2007, as there would be more emphasis on competitive pricing and widening of the existing market. Strong strategic alliances will be formed with the Group’s upstream operations in order to boost the trading of crude production.

While the threat of public abuse of pipelines and pipeline infrastructure continue to exist in our Gas and Power division, Management is confident of the strategies we have put in place to mitigate these challenges. Moreover, the immense opportunities provided by growing awareness of gas as a viable fuel as well as the demand for the  Government’s gas projects, such as the National Integrated Power Project provides immense opportunities for improving performance in the coming year. With the greater Lagos phase three pipeline grid having commenced gas delivery to corporate customers and its sister company, Eastern Horizon, expected to be completed later in the year, we expect significant contributions to the group’s bottom line from our Gas business in 2008.

Oando’s Energy business is expected to benefit from the divestment of low-margin Product Service Lines (PSLs) to higher margin PSLs in the coming year. To this end, we shall continue to seek to gain competency in new PSLs as well as increase our client base in the existing ones.

Our marketing business will continue to capitalise on Oando’s existing strong market presence to increase turnover and generate value for shareholders.

The successful roll-out of the Oracle Enterprise Resource Planning system is expected to boost business activities by integrating business processes and ensuring real time monitoring of operations.

Tinubu said the 2008 financial year would see Oando continue to pursue its strategic intent of exploring business opportunities in the higher margin products and segments. “We are excited about the opportunities that the market provides, and we expect to further boost margins in the future as our focus on increased efficiencies bears fruit,” Tinubu said.

For more information, please contact:

Meka Olowola
Head, Corporate Communications
Oando Plc
Stallion House, 2 Ajose Adeogun Street
Victoria Island, Lagos
Phone: 01 2625857
Email: nolowola@Oandoplc.com
www.oandoplc.com