The ability of the management of Eterna oil Nigeria plc to reduce cost of production has helped spike profit by 48 percent, analysis of the financial statement shows.
For the first six months of the year, the company’s net income surged by 48 percent to N974.36m from N658.94m the same period of the corresponding year (HY) 2013.
Earnings per share EPS increased to 75k in HY 2014 as against 51k as at HY 2013.
The push at the bottom line level can be associated with the reduction in cost of sales by 73 percent to N12.68bn compared with N46.41bn as at HY 2013.
Further analysis of the cost structure reveals that cost of sales margin reduced to 90.76 percent in the review period as against 97 percent in 2013.
Analysts say despite the improved cost savings, a cost margin of 90 percent is high as they advise management to intensify effort in further bringing down cost.
Net margin, a measure of efficiency and profitability increased to 6.97 percent jumped to 6.97 percent in the review period from 1.37 percent in 2013.
It should noted that the company’s impressive bottom line performance buoyed by improved margins is coming amid unfavourably operating environment caused by delay in subsidy payment and exposure to debt financing which is peculiar to the firms the downstream oil and gas sector.
Eterna is relentlessly cushioning its debt positions as finance cost declined by 48 percent to N194.74m in HY 2014 as against N363.94m the preceding year.
Additionally, the level of debt financing in its capital structure also reduced as debt to equity ratio dropped to 25.98 percent from 30.74 percent as at HY 2013.
Total assets were up by 1.08 percent to N13.02bn compared to N12.88 percent last year.
However, the top line level took a hit as revenue dipped by 71 percent to N13.97bn as against N47.85bn the preceding year.
Return on average equity ROE was 7.70 percent, while the return on average assets stood at 11.74 percent.
The company’s share price closed at N4.09 the floor of the Nigeria stock exchange while market capitalisation was N5.33bn