Subdued recovery dents Engen profits

Engen, the petroleum company, says subdued economic recovery is to blame for its poor results for the first six months of the year. All the major indicators of its financial statement released this week were in the red, showing that people parked cars as their disposable income come under pressure.

For the half year to June 2014, the Botswana Stock Exchange (BSE) listed firm recorded a 3 percent drop in turnover and gross profit compared to the same period last year. Turnover was P1, 2 billion while gross profit stood at P118 million.  “This was mainly due to the marginal decline in sales and non-adjustment of government controlled industry margins,” said a statement signed by Managing Director Chimweta Moonga and Chairman Dr. Shabani Nzinge. Operational profit was also down at 14 percent (P73 million), reflecting a mammoth challenge for the company going forward. Government’s subdued spending also slowed demand for petroleum products. “The industry also saw the proliferation of new fuel retail facilities that increase the level of competition in this sales channel,” said a statement.

A number of construction projects, which were drawing from the blue-chip company in the last three months of last year, also ended. This proved a challenge going into the New Year. Engen competes with other unlisted companies in Botswana such as Total, Shell and Caltex. Government has also established an oil company that is expected to come into full force in the coming months. The development will further increase the already tight competition in the fuel industry, especially for institutional clients. However, Engen, which was listed in 1989, is not sitting on its laurels as profits fall.

A number of planned marketing activities will soon be rolled out to attract clients to its fuel centres. A number of retail outlets are underway. As far as supply is concerned, the company is fine. “Fuel supply into our facilities from our primary supply locations continued to be stable and the price of fuel remained relatively flat,” said Nzinge and Moonga. On Wednesday afternoon, BBC reported that oil has declined to a record low in nine months. It ended the day selling at $103.70 (£62). During the period under review, Engen which boasts filling stations across the country launched Primax Unleaded and Dynamic diesel 50ppm.  

“Demand for these fuels continue to grow,” said the statement. The company is also looking forward to supplying new retail stores that are currently under construction throughout the country. 

A number of big companies such as Turnstar and RDC Properties have announced expansion plans. Despite a drop in overall profits, the company has declared a dividend of ten thebe. At the close of markets the company’s share price was 1014 thebe

Last modified on Wednesday, 20 August 2014 16:31

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