Oando delivers 63% year-on-year profit growth

Financial Indicators:

• Turnover increased 22% to $1.71bn from $1.41bn
• Gross profit rose 63% to $138.63m from $85.03m
• Profit after tax attributable to ordinary shareholders rose 105% to $47.90m from $23.31m
• Marked improvement in gross margin

Operational Highlights

• Completion of Lagos Phase Three Project of the gas distribution network
• Marked improvement in contribution from non marketing business
• “First Oil” in “OML 56”

Review of results
Oando CEO, Adewale Tinubu said, “We are pleased to announce today yet another strong performance, with gross profit of $138.63million, up 63% over the same period in 2007. This performance, anchored by superior and operating efficiency was largely driven by our Supply and Trading, Marketing and increasingly, Gas and Power businesses. This reflects the diversity and strength of Oando business model along the energy value chain. We are inspired by these results and confident that this positive trend will continue, leading to a robust year end performance.”

Consolidated profit after taxation increased by 66% from $47.90m to $128.77m in the third quarter of 2008. This growth is attributable to increased sales and improved margin recovery. Profit after taxation attributable to ordinary shareholders rose by 105% to $47.82m from $23.31m, while adjusted earnings per share increased by the same margin from 5.28c.

Balance sheet analysis.
Oando increased total assets by 119% from $950m to $2.01bn in September 2008 while total liabilities grew by the same margin all driven mainly by the increased level of business activities. Strategic acquisitions in the upstream sector have led to significant increases in our fixed asset balances, especially in the Energy Services and Exploration & Production businesses. This translated to the 30% growth in total assets . The Company intends to continue its drive towards building a sustainable business profile anchored on upstream business operations and gas distribution.

Prospects for the Future
The upstream and midstream operations will be the main drivers of Oando’s growth in the medium to long term.
The Marketing division is expected to sustain its current leadership role in supply management and on-time delivery of petroleum products to all our outlets. The company recently signed an agreement with a major fast moving consumer goods player thus boosting its non-fuel revenue potential. Efficient management of its working capital; effective supply chain management and trade receivable balances will ensure the company continues to show year on year growth in profitability.

The Supply and Trading division’s effort to dominate the West African market is gradually yielding result with the company’s strategic alliance with major marketers within the sub-region. As the largest private importer of petroleum products into Nigeria, the Company is expected to leverage on this leadership position to continue to deliver strong performance and guarantee its sustainable growth in the coming years.

The Energy Services division strategic intent is to become the leading service provider to Oil Producers- major and independent in the near future. To this end, the division expect to grow its current fleet of three rigs over the coming years to become the provider of choice while continually seeking to benefit from emerging opportunities that may arise from time to time in the energy service industry.

The Gas and Power division, having completed the phase three project of the Greater Lagos gas distribution network will embark on similar project in the Eastern part of the country through the laying of over 124km gas pipeline for Industrial companies in Akwa Ibom state. The company also intends to build captive power plants around Lagos for discerning users as a demonstration of its readiness to become active player in the power generation and distribution sector. The pioneering effort of the division in this regard should be completed before the end of next year

Lastly, acquisition of strategic upstream assets remains the corner stone of our future profitability and viability. We intend leveraging on the immense value imbedded in our downstream marketing business to unlock the potential that this sector holds for the immediate and future benefit of all stakeholders within the Group Company. Our upstream division recorded a major milestone with the attainment of “first Oil” in one of our upstream assets, “OML 56”. Other blocks within the portfolio are expected to attain the same feat in the near future.