Engen Volumes Increase Despite Oil Prices Rise

Staff Writer
Engen Botswana volumes have increased despite the upturn in international oil prices, which has seen local fuel pump prices going up. The company published first half-year results to September 2009, reporting a 17.3 percent increase in Earnings Per Share to P0.26.

Though volumes increased by 18 percent, revenue declined by 23 percent year to year to P555.3 million. Gross profit increased by 10.7 percent to P84.3 million on the back of a 27 percent decline in cost of sales, with the gross profit margin improving by 450 basis points to 15.1 percent.

A 15.9 percent increase in operating expenses was off-set by a 155.7 percent increase in other operating income, culminating in a 10 percent increase in operating profit. The operating profit margin increased to 11.3 percent from 7.9 percent in the first half.

Profit before tax increased by a larger margin (+28.4 percent) to P60.1 million on the back of a 72.7 percent decline in foreign exchange losses, as the company took an active role in implementing currency hedging measures.

The tax charge grew by 63.3 percent to P18.5 million, providing an effective tax rate of 30.8 percent. As a result of the higher tax charge, profit after tax grew only 17.3 percent to P41.6 million with the profit margin improving by 260 basis points to 7.5 percent.

An interim dividend of P0.11 was declared (last date to register 20 November 2009), payable to shareholders on November 27, 2009.Analysts believe the current policy of reviewing fuel prices regularly in line with movements in international prices is a positive development for the domestic oil industry. The practice allows a more responsive market-related fuel prices in line with the import parity price.

Analysts believe this will go a long way in easing the detrimental lag

effect of prevailing cumulative under-recoveries. However, rising cost on road delivery and intensifying competition within the fuel sector might be the biggest challenge for Engen. 

Meanwhile oil rose slightly on Friday, supported by positive US economic data. But wariness ahead of monthly jobs data from the US limited gains and kept its price below the psychologically key $80 level.

Despite data showing jobless claims in the US fell to a 10-month low last week and non-farm productivity rose at its fastest pace in six years in the third-quarter, oil prices fell nearly one percent on Thursday as high fuel inventories in the US raised worries about a recovery in demand.

US crude for December delivery crept up 12 cents to $79.74 a barrel after shedding 78 cents to settle at $79.62 on Thursday.

London Brent crude rose 31 cents to $78.30.The labour market is being closely watched as analysts try to gauge the strength and durability of a government stimulus-driven recovery that started in the third quarter and probably ended the worst US recession since the 1930s.

"There's not much news in the market. Traders are still looking to the US unemployment report for directions," said Clarence Chu, a trader at Hudson Capital Energy in Singapore.US employers in October are expected to have cut payrolls by the smallest amount in 14 months as the economy's resumption of growth boosted optimism, but the jobless rate still rose to a fresh 26-year high of 9.9 percent in October, a Reuters survey predicts. (Additional reporting by Reuters)



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