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MRS Oil: Low profit margin prolonging recovery



MRS Oil is expected to make further progress this year towards returning to its previous profit highs but low profit margin is prolonging the recovery journey. At the peak of its performance in 2010, the company converted 2.5% of its revenue into profit. This year, profit margin is failing to improve from 0.7% with which the company closed last year’s operations, the lowest among petroleum marketers.

Mr. Paul Bissohong, the company’s managing director/chief executive officer, has a limited space to drive the recovery process this year. His only option is to keep growing sales revenue, which he has been doing in the past two years. The challenge is that revenue growth isn’t expected to be that strong and therefore cannot provide the momentum that Bissohong needs to achieve full recovery and resume growth.

Sales revenue improved marginally by 2.4% to N47.16 billion year-on-year at the end of the second quarter. Revenue growth is weakened by a decline of 4.4% in the sales of premium motor spirit, which accounts for about 71% of the company’s turnover. Based on the second quarter growth rate, sales revenue is projected at N95.7 billion for MRS Oil in 2014.

The revenue anticipated for the year will represent an increase of 9.1% over the turnover figure of N87.74 billion the company posted in 2013. This means the company is expected to sustain revenue growth for the third year running though growth is expected to keep decelerating from 11.5% in 2012 and 10.1% in 2013. Slow growth in sales revenue is the general trend in the petroleum marketing group this year.

MRS Oil grew after tax profit by 64% to N315 million year-on-year at the end of the second quarter. It is expected to close the year with an after tax profit in the region of N640 million, which will be a marginal increase over the full year profit of N630 million the company reported last year. Profit growth could be stronger than projected if the accelerated growth recorded in the second half of last year is repeated this year.

The company improved profit margin on year-on-year basis from 0.4% in June last year to 0.7% at the end of June this year. Profit margin is however unchanged from the company’s position at the end of last year. Its profit margin is a distant lowest within the petroleum marketing sector that is led by Mobil Oil at 11.4%, followed by Oando 4.6% and Forte Oil with 3.9% at the end of the second quarter. Total closed its second quarter operations with a net profit margin of 1.8% and Conoil recorded a net profit margin of 1.3% during the same period.

There was a slight moderation in cost of sales during the review period, which permitted an increase of 6.5% in gross profit at N2.94 billion. This was reinforced by a rise of 61.3% in other income to N434 million and a drop of 25.2% in selling and distribution expenses. Administrative expenses claimed an increased proportion of sales revenue during the period. Despite that, the company still grew operating profit by 45.5% to N608 million.

Another favourable event is a growth of 202% in interest income to about N154 million, which caused a drop of 10.6% in net finance costs at the end of the second quarter. An increase of 131% in tax provision finally lowered the growth of the bottom line.

The company earned N1.24 per share at the end of the second quarter, up from 76 kobo in the corresponding period last year. Earnings per share of N2.52 is anticipated from MRS Oil at the end of this year. The company earned N2.48 per share in the 2013 full year.

Major developments in the balance sheet from the end of last year’s position include a drop of 34.7% in cash and bank balances to N8.57 billion, an increase of about 45% in loans and receivables to N1.41 billion and a 24% growth in inventories to N9.58 billion. The company’s short-term borrowings also went down by 8.6% to N14.46 billion over the same period.

Critical developments to watch on the company are revenue growth prospects and any gain or loss in profit margin. Accelerated profit growth achieved in the second half of last year was due to improvement in profit margin. Any improvement in profit margin will lead to a stronger growth in profit than has been projected.  Without improving profit margin, management will have to push sales revenue in the second half of the year to be able to step up profit recovery in 2014.– THE CITIZEN

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners



…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live



The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured



…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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