Kunle Kalejaye 27 July 2016, Sweetcrude, Lagos – Oando Plc is expecting lower earnings for the second quarter of 2016 due to the impact of the Naira devaluation against the US dollar resulting in unrealised foreign exchange losses.
This announcement is based on the unaudited financial statements for the period ended 30th June 2016.
The impact of the Naira devaluation by the Central Bank of Nigeria, CBN, would lead to an unrealised foreign exchange loss arising from dollar-denominated liabilities, outstanding bank trade facilities as well as vendor payables.
As at the time of the devaluation, the company had dollar-denominated borrowings of $261 million in its Naira dominated earning businesses, consisting of $68 million in core loans, $89 million in bank trade facilities, $83 million in asset financing and $21 million in other payables.
“A circa 40 percent devaluation in the value of the Naira against the US dollar from the bank rate of N199.00:$1.00 to N280.00:$1.00, has effectively resulted in these significant foreign exchange losses which we have prudently booked into our financial statements”, the company said.
But, despite the challenging operating landscape, the company said in a Facts Behind the Figures session at the Nigeria Stock Exchange, it would return to “consistent profitability by growing its dollar earning higher margin upstream and export trading businesses”.
Commenting on the company’s confidence in its diversified business model and the long-term prospects for growth in Nigeria and beyond, Oando’s Group Chief Executive, Mr. Wale Tinubu, said: “This first quarter of 2016 demonstrated our dedication to return our business to profitability by the end of the 2016.
“We have implemented constructive corporate initiatives which are driving forces for our business in this new global reality of economic restraint and lower oil prices in our industry. The successful and ongoing implementation of these initiatives reiterates our strategy of growth, deleverage and a return to profitability by the end of 2016.
“As a group we have placed our focus on growing our upstream higher margined business while still holding fundamental interests in the midstream and downstream sectors. We look forward to a rewarding year, where we solidify our aspirations and return to profitability.”
The group also recently agreed a N70.5 billion recapitalisation of its downstream business with Vitol, the world’s largest commodities trader and Helios Investments Partners, a premier West African-focused private equity firm. Oando’s restructuring is a microcosm of the global landscape with foreign exchange pressures leading to fiscal austerity and consolidation in many petro-cash economies.