Oando Plc Reports N45.51 Billion Pre-Tax Profit in H1 2024 Amid 51% Revenue Growth

 Oando Plc Reports N45.51 Billion Pre-Tax Profit in H1 2024 Amid 51% Revenue Growth

Oando Plc has released its unaudited financial results for the first half of 2024, posting a pre-tax profit of N45.51 billion. The financial statement, published on the Nigerian Exchange (NGX), revealed that revenues for the period reached N2.03 trillion, up from N1.34 trillion in the same period in 2023, representing a 51% year-on-year (YoY) increase.

Despite the revenue growth, the company’s pre-tax profit experienced a 178% decline, dropping from N126.86 billion in the first half of 2023 to N45.51 billion in the same period of 2024.

Key Highlights: H1 2024 vs H1 2023

• Revenues: N2.03 trillion, +51% YoY
• Cost of sales: N1.94 trillion, +50% YoY
• Gross Profit: N82.29 billion, +61% YoY
• Other operating income: N280.2 billion, +9% YoY
• Administrative expenses: N233.35 billion, +76% YoY
• Operating income: N121.93 billion, -30% YoY
• Finance cost: N93.8 billion, +72% YoY
• Net Finance cost: N76.41 billion, +58% YoY
• Profit Before Tax: N45.51 billion, -178% YoY
• Income tax credit: N17.13 billion
• Profit After Tax: N62.64 billion, -44% YoY
• Basic Earnings Per Share (EPS): N5, -44% YoY

In the second quarter of 2024, Oando recorded revenues of N810.34 billion and gross profits of N38.71 billion. Profit after tax for this period was N140.37 billion.

Key Drivers of Revenue Growth

The revenue surge in H1 2024 was primarily driven by Oando's Supply & Trading Business, which saw a rise to N1.8 trillion, up from N1.3 trillion in the previous year. This business involves the sale of petroleum products through Oando's subsidiaries in Dubai, Bermuda, and Nigeria. However, despite the revenue increase, the segment reported a pre-tax loss of N9.8 billion.

Additionally, Oando's Exploration and Production (E&P) business showed significant growth, with revenues increasing to N152.3 billion, more than double the N42.39 billion reported in 2023. The E&P segment contributed N107.7 billion to the group’s pre-tax profits, emerging as the key profit driver for the period.

Oando also benefited from foreign exchange gains and other operating income, which totaled N280 billion, with the reevaluation of upstream assets boosting their value from N1 trillion to N1.5 trillion.

External Funding and Debt

A review of Oando’s balance sheet reveals that the company’s total external loan rose to N1.6 trillion, up from N818.3 billion in the previous year. The company secured an additional N655.5 billion in new loans while repaying N289.4 billion during the period under review.

Although Oando did not provide detailed sources for the loans, its 2023 audited accounts indicate that significant portions were obtained from Afrexim Bank, Access Bank, and intercompany loans. Afrexim Bank remains a major financier for the company.

Notable Finance Deals in H1 2024

• Project Gazelle: Oando contributed $550 million to a $3.3 billion crude-backed finance deal led by Afrexim Bank.
• Temporary Overdraft: The company took a N58 billion overdraft for working capital, with partial repayment and rollover of N42 billion.
• FX Forward Contract: Oando secured a N16 billion forward contract with Argentil, partially repaying the overdraft facility.

Acquisitions and Strategic Moves

Oando made several strategic acquisitions in 2024, which contributed to its strong share price performance:

• M1 Petroleum sold 2.22% of Oando E&P shares to Calabar Power for $30 million, with phased payments completed within 2024.
• NAOC Acquisition: Oando acquired Eni’s Nigerian Agip Oil Company (NAOC) in August 2024, financed by $500 million and $150 million in loan facilities.
• Loan for NAOC Assets: Calabar Power secured a $40 million loan, guaranteed by Oando, to acquire a 20% stake in the NAOC Joint Venture (JV).

Conclusion

Oando’s H1 2024 financial performance highlights a solid increase in revenues, primarily driven by its supply and trading operations, as well as exploration and production activities. However, the company’s pre-tax profit decline and rising finance costs indicate ongoing challenges. Oando’s strategic acquisitions and external funding efforts are positioning the company for further growth, even as it navigates rising operational and financial pressures.

Oando remains focused on capitalizing on its expanded asset base and external financing to maintain its trajectory of growth in the second half of the year.