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Engen profits grow by 11.1 %

Publishing Date : 18 June, 2018

Author : REARABILWE RAMAPHANE

Botswana’s only listed petroleum and oil outfit, Engen Limited emerged out of the 2017 sluggish economic conditions and unfavourable trading circumstances with satisfactory performance.

The company which operates multiple service stations in over 25 settlements in Botswana gathered over 140 million pula in net profits after taxation for the 2017 trading year, mirroring a 11.1 % increase compared to the year 2016. This, according to the company’s annual report is predominantly due to robust realignment of the business operations staged by the company management in 2017 to confront the year’s trading challenges.  Engen Executive Director, Chimweta Monga observes that the realignment strategy enabled the company to achieve positive financial results despite the difficult market conditions.


Overall Group revenue for the year increased by 7.9% compared to that of 2016. According to the company’s annual report net profit after taxation growth consequently caused an increase in earnings per share, from 83.1 to 92.0 thebe. During the year under review, the retail side of the business grew by 3% while commercial volumes were up by 11% compared to the previous year. Commodity prices steadily improved and the price of crude oil strengthened to the extent that significant inventory revaluation gains were recorded over the previous year’s performance.


Just like many economic sectors which faced the wrath of 2016 mining activity halt in Francistown and Selibe Phikwe, shrinking money flow, the petroleum and oil business was not spared, however for Engen, against this mixed economic backdrop, market conditions remained fluid in the retail space especially in marketing areas that were predominantly dependent on disposable incomes from the mining activity.


The BSE listed fuel distributor reports that its retail market continued to be the cornerstone of the business, contributing around 60% of the company’s portfolio revenues compared to the commercial channel which contributed just below 40% of total revenues. Chimweta Monga, the Company Executive Director explained that in the trading period under review the business experienced intermittent product shortage particularly during the second half of the year due to an unplanned shutdown at one of the South African refineries. “This negated the usual marketing promotions that would normally have been employed to boost sales and increase turnover,” he said.


The company commercial businesses however did not escape the effects of collapses of some major mining companies. The constrained mining and associated support activities directly impacted the commercial segment due to reduction in demand in the market which depends mainly on heavy duty and industrial fuel uptake.


However, Engen was able to counteract this trend by diversifying its customer base through market penetration on the back of strong supply chain capability, “Our logistics partners continued to perform well, efficiently moving products from primary supply depots to secondary depots and to the diverse consumption points within Botswana,” highlighted the Executive Director.


According to the report the company was forced to draw from its cash reserves to fund operations during the year due to un-equalized pricing slate mechanism during the period January 2016 to December 2017. Monga revealed that discussions were underway to encourage the Government to settle the slate under recovery that is due to the petroleum industry in order to avoid disruption of the supply of fuel into the country, “A number of suggestions have been advanced to the government in order to resolve this matter. It is our hope that action will be taken sooner rather than later to contain this spiral,” he said.


Engen Botswana Limited also has direct interest in the property market; through a joint venture the company owns a shopping centre in Palapye which according to the report enjoyed a high occupancy rate, “Some upgrades to this property have been approved in order to maintain high standards consistent with the new shopping centres that have been developed in the area,” the report states. The Company’s second shopping centre, located in Maun, enjoyed a 100% occupancy rate with no loss of tenancy during the year.


Furthermore Engen added two new retail sites during the year 2017 one in Thamaga and the other at Tshekedi (Mmamashia) which were opened in November and December 2017 respectively, “Additional service stations are earmarked for 2018, beginning with Ramotswa where a retail site is nearing completion and scheduled to open early in the year.

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