July 31, 2020
By CardinalStone Research
11 Plc (MOBIL: TP – N177.26: HOLD) reported a 47.7% decline in EPS to N3.42 in its unaudited Q2’20 results due to weaker sales and higher operating cost.
- Revenue plunged by 43.8% YoY in Q2’20, driven by sales weaknesses in Fuels (-50.1% YoY) and Lubes (-20.3% YoY) segments. Sales of most petroleum products were affected by the imposition of restrictive measures in key economic centres to curb the spread of coronavirus. However, LPG sales rose by 18.4%YoY to N480 million during the review period.
- Gross margin improved by 96 bps to 9.29% despite the revenue weakness in the quarter. We attribute the reduced cost pressures to the steep decline in crude oil prices, which may have translated to lower raw material costs for Lubricant production.
- Other income also declined by 4.2% YoY to N1.94 billion in the review quarter, even though earnings from the property business was flat. Overall, after-tax profit contracted by 42.2% YoY to N1.2 billion in Q2’20
- In Q2’20, net cash balance slipped into negative territory due to an N11.5 billion CAPEX. Notably, the company has committed a total of N28.4 billion to assets under construction since the start of the year. This expenditure may be related to plans to enter into the hospitality business