Ardova Plc, the indigenous petroleum marketing company, suffered a net group loss of N7.6 billion in its 2022 operations, which has wiped off the company’s retained earnings of N6.6 billion at the end of the preceding financial year.
The company ended the 2022 financial with a retained deficit of N1.2 billion, which has impaired shareholders’ funds – which has dropped from over N17 billion to N9.3 billion over the same period.
The company’s loss figure for the year is double the net group loss of N3.8 billion it incurred in 2021, the combined effect of which has changed its position from retaining profit to accumulating losses.
In the event of another huge loss in the current financial year, the impact could get close enough to wiping out the company’s entire equity base.
Ardova’s audited financial report for the year ended December 2022 shows that weak revenue performance in the second half created the operating pressure under which costs consumed revenue and produced losses.
As much as N6.5 billion or 85.5 percent of the company’s full year’s loss was recorded in the second half.
Weakness in sales revenue worsened in the final quarter when the company’s turnover dropped by 11 percent or over N7 billion quarter-on-quarter to N58 billion.
The management successfully controlled input cost, which dropped ahead of sales revenue at 17.7 percent to N54 billion. That enabled the company to push forward from a gross loss of almost N320 million in the same quarter in 2021 to a gross profit of N4.2 billion for the final quarter.
Distribution expenses however could not be contained, which grew quarter-on-quarter from a positive figure of about N85 million to a net expense of N1.9 billion. Similarly, administrative expenses rose by 55.6 percent to N4 billion over the same period while a drop of 45.5 per cent in other income to N367 million worsened the earnings pressure.
The drop in other income extended the cost increases – which resulted in an operating loss of N1.4 billion for the company in the final quarter. This is however a drop from an operating loss of N2.2 billion in the same quarter in 2021.
A net finance cost of N1.4 billion was recorded in the final quarter, which added to the operating loss to build a net loss of N2.8 billion for the quarter.
The summary of Ardova’s earnings story in 2022 is a cost-income imbalance, as revenue stagnated against rapid increases in costs. The company closed the year with a turnover of about N241 billion, which represents an increase of N39.4 billion or 19.5 percent.
However, it could not convert any part of the gain in revenue into profit due to cost increases. The three main cost lines of the company grew ahead of revenue in the year and consumed more than the gross profit, thereby throwing the bottom line into the red.
Distribution expenses led to cost increases, which jumped by 236 percent to N6.4 billion in the year. Administrative expenses followed with an increase of about 52 percent to over N12 billion.
The increases in the two cost elements more than consumed the gross profit and yielded an operating loss of N2.5 billion for the year. This is a plunge from an operating profit of roughly N786 million in the 2021 financial year.
The third revenue-consuming expense line in the year is net finance cost which grew by 35.7 percent to N4.6 billion. It accounted for much of the net loss of N7.6 billion the company incurred at the end of the year.
The cost of sales was under control in the year at an increase of 18.4 percent to close at almost N227 billion. It afforded the company some cost savings that enabled an increase of about 42 percent in gross profit to roughly N14 billion at full year.
The company lost N5.83 per share for shareholders in the year, worse than a loss per share of N2.94 in 2021 – which has drained its equity resources.
