‘Staff dedication, Key to our success’

Femi Otedola,
Chairman, African Petroleum PlcAfrican Petroleum Plc is one leader in the petroleum marketing subsector due to its increased profitability ratios. In this interview, the Chief Operating Officer, Mr. Tunde Falasinnu, speaks with journalists on the new dawn in the company and Friday Ekeoba was there. Excepts:

The strategic initiatives that we applied which was the reason we were able to do so well in 2007 was emphasis on the human capital development.What is key to AP has been its workforce,who are resilient,hardworking and very focused. The problem has been the change in leadership but the staff remain steadfast and I think this is one key driver that made us to do very well in 2007.

With the assistance of our consultant ATMG which is led by Joseph Ezewe drew up a new organogram and we were able to reposition the staff and we equally created some divisions ,that is the specialty divisions which look after lubricants, aviation, LPG and chemicals.These are the products with high growth margin and I think this is one product that we can sell like Nestle or Cadbury without regulation.If we increase petrol from N70 by one kobo, even those of us here will remove our jackets and go on the street for increasing price of fuel.The specialty division was identified as margin driven area and we put an experience hand there to drive that division. We equally did some regional and functional realignment in the areas of new requirement and we have embarked on aggressive training of many of our staff. We all know that we had some problems in 2005, when one of our dealers developed and brought in about 100 stations to African Petroleum.This are distractions and for one reason or the other, he left puling all the 100 stations out. As a result,the first mission in my official statement was to say we need to launch what we call operation 100.

“ Operation 100” was to bring in 100 stations back within three months and I can tell you as at the end of the operation we achieved 86 per cent of that goal. As at today, our number of rental outlets moved from 394 to 480 and this is the reason why we have been able to sell more in the market. The company’s financial result have been wonderful under the new management and board.We remain indebted to the board and management for their forthright,purposeful and visionary guardians which have propelled our company to profitability level. I am pleased to present to you our company’s performance for 2007 and to intimate you on how we did it and our drive for continuous improvement in the future. I will quickly look at 2007, the five years progress of the company thus taking the turnover from 2003 down to 2007. In 2003, the turnover was N34.4 billion, 2004 it progressed to N58.1billion, for 2005 there was a decline to N42.7 billion and we knew that was one of the darkest period for African Petroleum, 2006 the company came back strong with a turnover of N81.9 billion, for 2007, we are celebrating N102 billion. Profit before tax in 2003 remained at N698 million, N1billion in 2004, and a negative N3.4billion in 2005. For the reasons we all that was the period we had problem with our major suppliers; the NNPC. For 2006, the company went up with 2.4 from the negative performance in 2005, and 2007 we reported N7 billion profit before tax. Tax as we have seen is N7 million in 2003, N136 million in 2004; N199 million in 2005, N276 million in 2006, and N1.3 billion tax in 2007. Profit after tax for 2003 was N210 million, N890m in 2004 and a negative of 3.5billion in 2005, for 2006 there was a profit of N2.1billion and for 2007 we made a profit of N5.7 billion, earnings per share which will interest the investors has been progressing as we can see from figures in 2003, it was 1.41 in 2004 and negative in 2005 because of what happened, 2006 was 2.74 and 2007 was 7.23. Dividend per share has been progressing except for the period when the company was not doing well.From 2003 till 2006,we could not pay any dividend, when our amiable and very energetic focused chairman took over the company. N1.00 was paid in 2006 and in 2007, N7.00 has been approved by the board based on the 2007 result.If you look at the net assets per share which is actual, 2005 2006, 2007 very progressive at 14.99 and as we have published, the board in his wisdom has recommended N7.00 dividend per share as part of the effort to create additional value for share holders for their support and perseverance during the trying period. This is what we are proposing to the shareholders in our AGM coming up this week.

Frequency of financial reports
The new finance director is somebody I can call a miracle worker, because for those of us who know what has been happening in African Petroleum in terms of the accounts records, he was able to clean up the books and able to publish first of all the third quarter reports of 2007 within two months of his joining the company. Also we are now able to reconcile customers and debtors balances, embark on various recovery drives of our debtors and I think this equally added value to our performance because we are able to get a lot of money back from those who have owed the company. We improved on our import because as at the time the chairman came in African Petroleum was barely importing one and the half vessels of 33,000 metric tones of PMS, but today we are now doing four vessel to support what we are getting from NNPC that you can see reflects what we are going to declare at the end of our third quarter.

Expansion and profitability
We have almost completed our 100 storage depot which is in Port Harcourt . This is one area that has a lot potential in terms of market growth and by the time we commission the depot we hope that we should be able to make more volume in the south – south and south-east area. We have improvement in working environment with special emphasis on safety the very key to our operations because of the type of product we handle. To ensure that the company is run in line with principles of corporate governance. There is full disclosure of accountability to investors by the new board and management. This has been what we did in 2007 and we feel that with all we have put together, the figures we have seen and the performance we have seen have been the driver that we believe would propel us to the future. We see it as the opening bill of what we are going to see later.

On safety measures and new innovations
we are modernising our operation in line with safety practices all over the world and this will help our future distribution of product throughout Nigeria.One thing we have done is the introduction of mobile LPG filling plant. Today the existing structure cannot cope with all the bottles we need to fill, we have plan for mobile filing plants which we are bringing in very soon and this mobile filling plants we be installed in some key locations and key cites but first of all we are starting with Lagos , Port Hacourt, Abuja and Kano . By the time the equipment are around it will be easy for us to fill the cylinder very close to our neighborhood. Gas cylinders have been a problem to most users and that is why the LPG market in Nigeria is suffering. First of all the size and weight of the cylinder is very heavy for housewives. But we are coming up with composite cylinder very light and as you are using it you know the level it has dropped to. Expansion is been planned for ATK because the greatest problem of the industry is shortage of fuel. All this we plan to finance by your assistance, guidanceand paying through the money we intend to get from the capital market when we have our public offer and the right issue approved.Also we are applying inventory management by getting to our customers, telling them to face their core business so that we can serve them better. Most of them will have storage in their factories, we supply the equipment, put in the product, supplying the product directly to the equipment and they pay us just for the usage of the energy. We are doing this already with a mobile filling station

Future plans of the company
For the future, we have started what we call the culture change because if you have gone through several dark times, culture has to change.Our chairman,Mr. Femi Otedola and his team,want to improve our marketing infrastructure through retail outlets expansion and modernisation. We are coming up with about five mega stations very soon . We have fully implemented efficient online ICT system to consolidate our west coast expansion. We are already in Ghana .We have five retail stations in Ghana. We have almost completed our Onne depot which is 15,000 metric depots which is the first phase.For the future we are planning another 15,000 metric tones and this we believe will help us to tap from the resources in the market in the south -south and south- east.
Also in Port Harcourt, we have land reclamation road.We believe the PMS market will need to support what is coming out from Port Harcourt refinery in following our resolve to construct a 50,000 metric tones of PMS depot on the reclamation road in Port Harcout. In Apapa, if you go through that area you will see that AP has expanse of land, we are equally planning 120,000 metric tones storage depot for Apapa which we believe can make us store at least three cargoes by ourselves.

Today what we do is to do tribute arrangement with the people that have depot and this is costly but by the time we finish our own installation we will be able to store all the products that we are importing. We are rehabilitating our Apapa Bitumen plant, the LPG plant. The minister for petroleum and gas we have discussed a lot with him on this and his equally supporting and we believe that very soon we want to make gas available to Nigerians.

Ethanol and the challenges of Nigerian downstream sector

Komolafe Rasheed, Lagos

Odein Ajumogobia, Minister of State
for Energy (Petroleum)Ethanol or ethyl according to the United States Department of Energy “s National Renewable Energy Laboratory ,is a liquid, clear ,colourless liquid with a characteristic, agreeable odour and taste. It is a drinkable alcohol .It is also the active ingredient in beer ,wine and spirits. The above is exactly what a major petroleum market [names withheld] imported into the country as a Premium Motor Spirit [PMS], otherwise known as petrol, about nine weeks ago.

The ineptitude and ineffective regulatory agency in the oil industry call Department of Petroleum Resources [DPR] had certified the product fit for Nigerian market before another regulatory agency, Nigerian Consumers Protection Council(NCPC) issued a statement signed by Abiodun Obimuyi, Assistant Director (Public Relations) almost a week after it has been certified fit for Nigerian market by the DPR warned Nigerians on the presence of bad fuel in circulation and the need for motorists to be cautious on the inherent danger in the fuel.

The Nigeria Consumers Protection Council issued another letter someday to the DPR the industry regulatory agency specifically charged with the responsibility of ensuring that products brought to the Nigerian market conformed to specific standard Unfortunately the DPR went to sleep for one week after it received the letter from the CPRC. The nonchalant attitude of the DPR for almost two weeks after the product had been discharged to a sizeable number of filling stations especially in Lagos area caused substantive damage to motorist and users of generating sets. When eventually the DPR woke up to its responsibility on Tuesday, 4 march, 2008, 21 days after the bad fuel had been in circulation (note that the major market imported the bad fuel into the country through Gunvor international b.v Amsterdam on February 14, the damage had been done. Nigerians have gone to town with tales of woes resulting from the bad fuel they bought from retails outlets. In an effort to save its face the DPR director, Mr. Anthony chukwueke ended up giving the regulatory agency out as an ineffective and disabled watchdog.

The simple fact that the DPR inspected the said bad fuel and certified same fit for Nigeria market attested to this fact. The explanation by the DPR director that the high ethanol level in the bad product escaped chemical analysis because the regulatory agency did not have the necessary tool to test for ethanol raises more question on the integrity of the DPR as the regulatory agency of the eight largest oil producing country in the world. The explanation of the DPR which was intended to be a face saving mechanism ended up exposing the agency as an ineffective parastatal.

The petrol imported by the Gunvor on behalf of the major marketer was an E20 grade meaning that it had 20 per cent raw alcohol against Nigeria zero per cent ethanol requirement before our epileptic refineries made us to concede to five per cent ethanol content for imported petrol.

The Gunvor argued that there was never any agreement on the imported fuel as regard ethanol content. It claimed further that the product it brought to Nigeria was the same that is supply to Brazil and American market and since there was no agreement as per ethanol content between it and Nigeria the allegation by the DPR that it willfully concealed the ethanol content can not stand the test of time more so when the DPR that certified the product as good for Nigeria market did not ask it to declare the composition of the cargo. Despite the accusation and counter accusation between the company and the DPR, the regulatory agency nonetheless blacklisted the company while it imposed a fine on the major marketer on whose authority the fuel was supplied to the Nigerian market. Since March 4,2008, when the DPR finally made its findings known to the Nigerian public the ghost of bad fuel as continue to hunt the country. Investigation by the Nigeria Tribune shows that most of the cargos that are on Nigeria high sea waiting to berth and discharge at the port today are laced with high per cent ethanol content and the director of DPR in trying to protect his job has ordered that those cargos should not be allowed into our depot terminal and his stance on this is the result of what we are witnessing today,that is fuel scarcity.

As at today almost half of the filling stations in Lagos are under lock and key, most fuel depot in the state have no fuel to discharge to their teeming filling stations. The worst hit are the Mobil, Texaco Total and independent marketers petrol stations and unless urgent steps are taking to reverse the trend the country may in no distant future find itself engulf in another round of fuel crisis. The reason for this is not far fetched; the Nigeria National Petroleum Corporation remains the sole importer of the premium motor spirit and the little it imports can not go round.

Most major marketers, according to the Nigerian Tribune investigation shows that many companies have stopped the importation of the fuel because of the fear of contaminated ethanol . The present scarcity according to industry source may not end soon, unless the Federal Government did the right thing by fixing our epileptic refineries and bring new one on stream, its much touted energy sector reform may be in jeopardy.
I can belt that no sensible and serious company will venture into importation of PMS now because they can never tell what the situation will be when it arrives our shore.

Those who are caught in the ethanol saga know what am talking about. A lot of cargos which DPR banned from coming to our depot terminals are their on the high sea not knowing what to do next “the source concluded. Present development portend one thing – that if the Federal Government fails to holistically over haul the entire energy sector, fix our refineries and bring new ones on stream as suggested, the country may from now on have to contend with ethanol induced scarcity for a very long time to come.