Oando may post N70b loss as auditors refer account to FRC

Oando, Nigeria’s indigenous integrated energy group, may record a pre-tax loss of not less than N70 billion in the 2015 business year, according to preliminary review of the management accounts for the year.

Sources in the know said Oando, which had reported a net loss of N184 billion in 2014, could record pre-tax loss of above N70 billion, based on the guidance provided by the management of the energy group.

The management of Oando had in a regulatory filing indicated that its full-year performance for 2015 remained in line with its third quarter performance, referencing a period that the group posted a pre-tax loss of N52.03 billion.

The regulatory filing also underlined the serious financial crunch facing the energy group and the built-up losses since 2014, a situation that made the external auditors to the group, Ernst & Young (EY) to refer the accounts to the Financial Reporting Council of Nigeria (FRC).

The audited report and accounts of Oando for the year ended December 31, 2015 is expected to be released around May 31, 2016, according to the guidance provided by the management of the group after it failed to meet the March 31, 2016 deadline for the submission of its annual report as required by the listing rules at the Nigerian Stock Exchange (NSE).

Read also: Oil majors to provide $200m to 4 oil marketers , Kachikwu says

According to the management of Oando, after reviewing the financials for the 2015 business year, Ernst & Young concluded that the accounts will need to be subjected to further external review and decided refer the accounts to the FRC pursuant to Rule 5 of the recently publicised FRC Rules.

“The company’s management would also like to bring to the attention of its shareholders and the investor community that the accounts of the company at full-year 2015 will be in line with its third quarter 2015 performance. The expected decline is attributable to the industry’s downturn, prevalent economic headwinds, as well as fiscal and monetary restrictions driven by a challenging macro environment. While we are actively restructuring the business to adapt to this difficult period, we are optimistic and steadfast in our commitment to return to profitability in 2016,” Oando had stated in the regulatory filing.

Oando had recorded a pre-tax loss of N52.03 billion in the third quarter 2015, continuing a string of losses that has significantly impaired the assets and share price of the indigenous integrated energy group.

Nine-month report for the period ended September 30, 2015 showed that the oil and gas group was totally in the red during the period, with decline in turnover and operating loss, pre-tax loss and net loss after tax.

The third quarter report came on the back of earlier report that showed that the oil and gas group recorded a net loss of N183.9 billion in the year ended December 31, 2014 while net loss after tax stood at N21 billion and N35 billion in the first and second quarters of 2015.

Major highlights of the nine-month report indicated that turnover dropped to N95.78 billion by September 2015 as against N101.33 billion recorded in comparable period of 2014. Gross profit declined from N64.12 billion to N41.06 billion. As against operating profit of N31.78 billion in third quarter 2014, the company recorded operating loss of N13.18 billion in third quarter 2015. With net finance costs rising from N28.6 billion in 2014 to N38.83 billion in 2015, loss before tax stood at N52.03 billion in 2015 compared with pre-tax profit of N3.22 billion in 2014. After taxes, net loss stood at N47.80 billion in 2015 compared with net profit of N10.7 billion in comparable period of 2014.

The negative profit and loss accounts also affected the company’s balance sheet as total assets dropped by N57.75 billion from N889.37 billion recorded at the beginning of this year to N831.62 billion by September 2015.

But the management of Oando had insisted that the fundamentals of the oil and gas group remained sound and there were no cause to fear about its going concern and future returns.

Group managing director, Oando Plc, Mr. Wale Tinubu, said the losses recorded in recent periods were cautionary impairments and write-downs due to the steep declines in crude oil price and depreciation of Nigerian currency and would in no way jeopardize the medium to long-term performance of the group.

He said Oando Group has built enormous assets across the broad spectrum of the oil and gas industry that would ensure that it meets investors’ aspirations in the years ahead.

Tinubu explained that the impairments that led to the losses were not cash losses but were cautionary reductions in the value of assets of the group including oil reserves, oil debts and drilling rigs in the face of the global fluctuation in the oil and gas industry and related foreign exchange challenge in Nigeria.

“The company’s fundamentals are sound, it has the right products in the right markets,” Tinubu assured, drawing attention to the facts that Oando Group has the largest indigenous oil production, the largest swamp drilling fleet in Nigeria servicing international oil companies, the largest indigenous gas distribution network and the largest indigenous supply and trading network in the Sub-Saharan Africa region among others.

According to him, the group decided to take realistic approach to current valuations of its assets and contracts in line with the current global trends, and future improvements in the global oil industry could lead to similar write-backs in addition to operational performance of the group, which would both deliver better returns to investors.

He added that the oil assets of ConocoPhillips, which the group acquired in 2014, would start to contribute to the group profitability as from 2016.

 

 

RipplesNigeria… without borders, without fears

 

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now