11 PLC 9M'19 Earnings - Rental Income Supports Profitability In Q3
Rental income supports profitability in Q3
MOBIL released its 9M’19 results yesterday, reporting a 13% y/y growth in turnover to ₦141.5 billion over the nine-month period. However, 9M’19 after-tax profit declined 19% y/y to ₦6.3 billion, dragged by the persisting lean margins in the downstream industry. Notably, gross margin fell to 8.1% in 9M’19 from 10.2% y/y in 9M’18.
Margins have remained predominantly weak since 2017 when the NNPC emerged as the sole importer of regulated fuels in the country. For context, the ex-depot price of premium motor spirit (PMS) is currently about ₦137/litre while the retail pump price remains fixed at a regulated figure of ₦145/litre. That said, MOBIL’s gross margin worsened to 8.1% in Q3’19 from 8.8% in Q3’18. Nonetheless, MOBIL’s Q3’19 gross profit advanced y/y to ₦3.9 billion (Q3’18: ₦3.4 billion), driven by the y/y growth in sales. Unsurprisingly, operating profit was boosted by rental income from the firm’s real estate property. We highlight that Q3’19 rental income came in flat y/y at ₦2.0 billion, accounting for 63% (Q3’18: 57%) of operating profit. All in, MOBIL reported a profit after tax of ₦2.2 billion, indicating a 10% y/y drop— a reflection of thinner margins from sales of regulated products.
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