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Published On: Sun, Oct 1st, 2017

11 Plc’s Thinning Margins Point To Challenges Ahead

In the first financial report under the name 11 Plc, former Mobil Nigeria succumbed to market pressure, which slowed revenue growth and sliced off margins in the oil marketing company, to signal tough times ahead after its refocusing exercise that required a takeover by NIPCO.
In the half year ending June, the oil company grew revenue by a weak 11.85 percent to N56.22 billion from N50.26 billion. The slow rise should signal the need to aggressively explore more markets to grow investors’ value especially as the company’s bottom line failed to improve over the performance in the equivalent period in 2016. The company’s cost of sales grew heavier by 20 percent to N49.39 billion from N41.16 billion, which contributed to the sliced value of first line profit or gross profit to N6.82 billion from N9.1 billion. Thus began the first drop in margins as gross profit margin backtracked to 6 notches to 12.14 percent from 18.1 percent.
Even though operating costs were not too different from their position in the equivalent quarter, operating profits sank 12 percent to N5.68 billion from N6.46 billion. The slide can be traced to the weak gross profit, which in turn was encumbered by the thinning revenue base. A shilly-shally operating profit level led to a shrunken operating margin of 10.1 percent, down from 12.85 percent. If anything, this is signal for the company to take another look at the amount of money spent on operations relative to the amount of revenue made in the period.

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