Operational efficiency drives 69% rise in half year profit growth

Financial Indicators:

• Turnover increased 25% from $884.09m in 2007 to $1.05bn in 2008.
• Group recorded a 66% increase over prior year gross profit of $52.72m.
• 110% rise in adjusted earnings per share from 1.64c to 3.44c.
• Inaugural proposed interim dividend of N3.00.
• Improved performance over previous year on all major indicators.

• Improved margin recovery on petroleum products,
• Efficient supply chain management,
• Stable supply of petroleum products,
• Marked improvement in contribution from non marketing businesses, Efficient working capital re-alignment and proactive cash management,
• Strong organic growth

Oando CEO Wale Tinubu said the group’s half year position reflects the consistent improvement in operational efficiency that has become Oando’s hallmark. “The half year results show a marked improvement in performance compared to our first quarter and previous year’s results. The results are driven by superior returns anchored on operational excellence – especially from our supply and trading; and downstream marketing businesses,” Tinubu said.

He continued, “As a demonstration of the Board’s confidence in the quality of the group’s performance and in the full year prospects, we are proposing to pay an interim dividend of N3 per share – a major milestone for the group.”

Oando’s supply and trading and marketing divisions accounted for the bulk of the increase in the Group turnover. In addition to the higher volume of trade, the company saw a marked improvement in its margin recovery, thus boosting margins.

Growth in the energy service division, other business activity and general increases in the cost of doing business account for the increase in operating and administrative expense by 63% over prior year. Non-fuel revenue showed an increase of 48% from previous year. The 2008 performance reflects success recorded at growing our non- fuel income, as the prior year level was boosted by income accruing from the disposal of a non core asset.

Prospects:

Tinubu said Oando had strong a strong growth outlook, with investments in gas and power distribution and the acquisition of strategic upstream businesses providing a solid base for future profitability. “We intend leveraging the immense value imbedded in our marketing division to unlock the potential that these two sectors hold for the benefit of all our stakeholders,” Tinubu said.

Tinubu said Oando expects the marketing division to sustain its current leadership in supply management and on-time delivery of petroleum products to all outlets. Non-fuel revenue is also expected to improve significantly as new products introduced during the early part of the year gain market acceptance. “We will continue our cost containment efforts, and the proactive cash management procedures we have in place will be sustained through the year,” Tinubu said.

Oando Supply and Trading business is better poised than before to further improve and solidify its presence as supplier of choice in Nigeria and neighbouring countries in West Africa. The company is expected to leverage its market niche that it has created for itself to deliver strong performance in the coming months. “ Strategic alliances formed with the Group’s upstream operations, amongst other partners will also aid the trading of crude production, while the emergence of other identified business opportunities will contribute to ensure that its goals are met,” Tinubu said.

Oando Energy Services has been re-engineered to offer superior and world class mud-engineering, drilling system and drilling rig (swamp and land) services to companies operating in the upstream sector of the energy chain. The recently acquired rigs have been refurbished, and are scheduled to commence operation before the end of this year while our activities in other high margin services are also expected to boost profitability within this division.

Lastly, major milestones have been achieved within our portfolio of upstream assets paving the way for the arrival of our “first oil”.