Ardova Plc Weak Topline Growth Undermines Earnings

Olumide Adeosun Ardova Plc CEO

Ardrova Plc published its fourth quarter unaudited financials for the period ended December 31, 2022, reporting a loss per share of NGN2.17 as against loss per share of NGN3.90 in same period in 2021, bringing the 2022 full year loss per share to NGN5.83 as against NGN2.95 in 2021 financial year.

The company performance remained unimpressive, underscoring the marketers’ struggle for positive earnings since Q2-22. Considering the operating headwinds in the downstream oil and gas space amid elevated inflationary pressures.

Revenue contracted by 10.9% y/y in Q4-22, primarily due to a decline in the company’s fuel (-20.5% y/y) business segment that offset the gains recorded across the Lubricants and greases (+23.4% y/y); Solar system (+144.6% y/y); LPG and cylinder sales (+1.3% y/y); and Haulage and transportation services (+1,405.3% y/y) product lines. Meanwhile, on a q/q basis, revenue grew slightly by 4.1% following a 16.6% q/q increase in the lubricants and greases (16.6% q/q) segment.

Gross margin turned positive as it came in at 7.2% for the quarter (Q4-21: -0.5%), as cost of sales margin reduced to 92.8% (Q4-21: 100.5%). We highlight that the cost pressures in the period were influenced by the rally in crude oil prices (Average Brent price: USD89.13/bbl in Q4-22 vs USD78.47/bbl in Q4-21). Notwithstanding, ARDOVA’s operating margin remained negative at -0.8% (Q4-21: -3.4%) amid a 136.1% y/y increase in operating expenses.

Net finance costs declined by 45.1% y/y to NGN1.42 billion (Q4-21: NGN2.59 billion), primarily due to a 45.1% y/y fall in finance cost, and a 194.9% y/y growth in finance income. The lower finance costs outturn reflects the zero-balance recorded on net exchange difference on borrowings (Q3-21: NGN1.50 billion).

Overall, the company recorded a loss before tax of NGN2.83 billion, representing a 40.7% y/y decline from the NGN4.77 billion recorded in Q4-21. Accordingly, loss after tax settled at NGN2.83 billion (vs loss after tax of NGN5.10 billion in Q4-21) in the absence of any income tax expenses for the period.




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