Engen feels brunt of falling oil prices

Isaac Pinielo | Friday April 1, 2016 15:34

Engen Botswana managing director, Chimweta Monga attributed the loss to the three fuel price decreases that occurred during the year, consistent with reduction in global crude oil prices.

The fuel price decrease was said to be due to a general decline in international crude oil prices, and it has been attributed to concerns of oversupply and gloomy global oil demand.

Monga, however, said most of the group’s actual operating parameters were within the planned margins in spite of the reduction in global crude oil prices from around $50 per barrel to slightly under $30 per barrel at the close of the year. “Considering the subdued global local economic conditions, this (Engen’s) performance was laudable,” Monga enthused.

The group’s total sales volumes grew by five percent between 2014 and 2015. Monga stated that this was due to the depreciation of the South African Rand in relation to the Pula.

Overall, the group’s performance reflects a 58.2 percent increase in net profit after tax (PAT) in 2015 compared to 2014.

The managing director further pointed out that fuel supplies into Botswana continued to be stable with industrial action in both South Africa and Botswana having little effect on supplies.

He said a planned shutdown at the group’s affiliate refinery in Durban was well substituted by imports on most of the products of Liquefied Petroleum Gas which was in short supply for a period of three months during the refinery shut down period.

In addition, Monga said the group streamed two “new to industry” retail outlets in February 2015 and November 2015.

“While competition in the retail channel across the industry increased with several new outlets being commissioned, the group managed to grow retail sales by 14 percent in the year under review,” he said. He said Engen continued to offer outstanding customer service at its retail outlets, “as evidenced by our consistent top three rating in the Engen group of companies in the international business division for the year 2015”.

He indicated that retail remains the cornerstone of their business in Botswana, adding that adequate focus will be applied to ensure continued growth in this market segment.

“The commercial side of our business continued to deliver robust results in spite of the completion of a number of construction projects and challenges faced by the mining sector,” he said.

He also said distributors and lubricants continued to play a pivotal role in the financial performance of this channel. The group rolled out 50 parts per million (ppm) diesel and (Unleaded Petrol) ULP 95 RON (Research Octane Number) to about 70 percent of the retail network during the year under review. Monga emphasised that the group exercised good margin management and cost control throughout the year, noting that the results testify to the success of the company’s business model under challenging global conditions affecting the oil industry.

“The group maintained a healthy cash positive position which helped to fund capital investment and meet our obligations to our suppliers and shareholders,” he said. A final gross dividend of 22.3 thebe per share in respect of the year ended 31 December 2015 has been declared payable to ordinary shareholders registered in the books of the company at the close of business on 8 April 2016.