Conoil as Investors' Delight
By Uche Obike
When the Federal Government flagged off its privatisation policy some years back by selling off its shares in selected companies, not many Nigerians gave the programme a chance of yielding the desired results. The issue generated heated debate across the country and for many months remained on the front burner of national discourse. The few analysts who believed privatisation would save the moribund government-owned companies from imminent death urged caution and sincerity in implementation. Those against the policy were unequivocal and passionate in their criticism of a decision they feared could spell dire socio-economic repercussions for the country.
It was amid this raging controversy that the Government disposed of its equity in former National Oil and Chemical Marketing Plc (NOLCHEM) (now Conoil Plc), and a few others. Conoil Plc, the first indigenous petroleum products marketing company in Nigeria, has today become a unique yardstick for measuring the success of the privatisation programme. In explaining the rapid restoration of the company from the brink of extinction to the top performers' chart in the downstream sector, industry watchers ascribe the feat to the financial expertise of the board of directors led by Dr. Mike Adenuga Jr., a business mogul with legendary acumen.
Before government's resort to privatisation, it was apparent that the company needed urgent lifeline. At the time the core investor took over the management of Conoil Plc (then known as NOLCHEM), the company was in total distress with huge debt overhang and a generally abysmal balance sheet. Fixed assets were idle and un-utilised, operating expenses were rising progressively because of many leakages in the system and there was gradual erosion of shareholders' fund as a result of mismanagement. As the company was running largely on overdraft, it became increasingly difficult for it to keep its head above water, hence for many years there was no return on investment.
So for the shareholders of the pre-privatised NOLCHEM, it was a tale of woes through and through as they helplessly watched their investments going down the drain. But with privatisation came a new dawn: the core investor halted the drift decisively and steered the company back to the path of profitability; and the shareholders are smiling again.
The process of revamping the organisation began with the launching of a re-engineering programme designed to recondition the company in the shortest time possible and prepare it for the emerging challenges in the downstream sector. As part of the restructuring, new concepts were introduced to enhance the company's efficiency and to plug all leakages in the system. A Central Operating Unit was introduced to facilitate operational monitoring and control, an initiative that has caused greater effectiveness and transparency in the company's activities. Consequently, shareholders' confidence has been restored through strategic planning and investment, better financial and treasury management, increasing customer equity, stable profitability and rising turnover.
Through conscious efforts aimed at ensuring optimum utilisation of the company's assets, the management succeeded in re-acquiring some of the company's choice property, including its 20-storey Bull Plaza head office in Lagos, sold off by the former management under questionable circumstances. The office floors in Bull Plaza were also reduced from 19 to six, while the rest was put on rent in order to avoid waste and to augment revenue from Non Fuel Retail (NFR) business. Manpower in the various departments was reinforced with core competencies. The company made it a priority to re-open retail outlets that were hitherto closed by the former management, thereby strengthening its visibility across the country.
The massive investments and strategic planning embarked on by Conoil Plc in its core businesses have continued to impact positively on its overall growth. It has recorded considerable boost in its market share and established an enviable tradition of progressively rising profile in capital market. This is not unexpected in view of the company's impressive growth in market value, which moved from N14.69 in 2002 to N114.99 in 2003, representing 683 per cent increase. As at June 2004, the share price has appreciated to N195.51, representing 923.33 per cent growth. This far exceeded the 728 per cent, 527 per cent, 718 per cent, 711 per cent and 676 per cent recorded by Texaco Nigeria, Oando Plc, Total, AP and Mobil respectively.
Conoil Plc also has a tradition of delivering constantly improving returns on shareholders' investment. Since the change in management after privatisation, the company has consistently declared dividend at the end of each financial year. It paid N69 million to shareholders in 2000, N171.5 million in 2001, N686 million in 2002 and N2.6 billion in 2003. Between 2000 and 2003, the company achieved 280 per cent growth in Profit Before Tax, posting N1 billion in 2000; N1.2 billion in 2001; N1.5 billion in 2002 and a whopping N3.8 billion in 2003. It also recorded N34.5 billion Turnover, with an enviable record of 99.92 per cent growth in Gross Income between 2001 and 2003, that is N17.3 billion (2001); N21.9 billion (2002); N34.5 billion (2003). Earnings per Share rose by 107 per cent from 216 kobo in 2002 to 447 kobo in 2003.
Capital market and other financial analysts have identified Conoil as a company with immense potentials for sustainable growth. The company has continued to live up to this assertion, judging from its lofty performance over the years vis-a-vis its competitors and its ever-improving balance sheet. The company recorded a growth rate of 58 per cent in Turnover over last year's performance. This surpassed the result of Texaco, Oando and Total that showed 21 per cent, 34 per cent and 20 per cent growth respectively during the same period. Conoil also recorded 11.02 per cent growth in Profit Before Tax to Turnover rate, as against Total's 6.48 per cent, Mobil's 5.83 per cent, Oando's 2.43 per cent and Texaco's 2.21 per cent. Similar impressive results were achieved in the company's net assets and current assets.
Brilliant as these trading results are, Conoil continues to explore the emerging markets and aspire to higher heights. Dr. Adenuga, chairman of the company's board, once declared in one of its annual general meetings: "We are poised to drive our business to greater success and re-establish Conoil's commanding presence in the industry." This declaration perhaps informed series of initiatives currently being launched in the different segments of the business. In Retail, there is an aggressive retail network expansion scheme that has culminated in the building of multi-million naira mega stations across the country, some of which have been completed and will soon open for business in Abuja, Lagos, Yola. Besides is a special university campus scheme under which retail outlets are being located in institutions of higher learning.
As part of efforts to reestablish its leading edge in the lubricants business and further boost its bottom-line, the company is set to export its top quality engine oil brands, Quatro and Golden Super Motor oil, to neighbouring West African countries and beyond. It has strengthened its lead in the Aviation business by acquiring state-of-the-art mobile (aircraft) fuelling equipment, to enhance performance and customer-service delivery. The company has also taken delivery of multi-million naira equipment from Siraga, France for its Liquefied Petroleum Gas (LPG) plant that is under construction in Lagos. In addition to the initiatives in Retail, Aviation, Lubricants and LPG, the management has also embarked on aggressive acquisition of imported fuels and chemicals, while augmenting its storage facilities for Automotive Gas Oil (AGO) and other products at its depots nationwide. The company has become the preferred choice for large strategic customers in specialised products such as bitumen, base oil, AGO, due to competitive selling proposition and product security.
Going by available indices, Conoil Plc is on the upswing, aiming for the driver's seat in the downstream oil sector. Conoil's corporate vision is to become Africa's leading petroleum marketing company, with the largest retail network and offering world-class products and services. In so short span of time, the Adenuga-led board has proved beyond doubt that this vision is achievable. Renowned for his impeccable credential as an astute entrepreneur with a record of outstanding successes in various businesses, Adenuga has brought his Midas touch to bare on the fortunes of Conoil Plc. It is to his credit that Conoil, a company that was on the verge of bankruptcy before privatisation, has turned investors' preferred stock with very high potentials for growth.
Michael Adeniyi Adenuga is contemporary Africa's businessman extraordinaire. His exploits in the Nigerian economy are the stuff with which classic business epics are made. With interests in banking (wholesale and retail), manufacturing, real estate, petroleum-mining (onshore and offshore), nationwide marketing of petroleum products, the hospitality industry, local and international market activities, Adenuga took the Nigerian communication industry by storm at the end of August when he launched Glo-Mobile, Nigeria's latest and fastest-growing network in the Global System for Mobile communication (GSM) arena.
Before Adenuga bought over government's controlling interests in NOLCHEM, the company had not only lost market leadership, it was no longer a serious player in the industry. Its shares had all but lost value in the stock market. How he turned the fortunes of the company around in 12 months and put it on a profit overdrive should soon become a course of study in Nigeria's business schools in years to come.
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