Despite an increase in revenue, the profit of Oil company, 11 Plc, formerly known as Mobil Oil Nigeria, is nothing to write home about as it significantly drops while cost of sales skyrocketed as well in first three months of this year, the company's Unaudited Financial Statement For The Period Ended March 31, 2020, disclosed.
Shareholders Should Postpone Celebration
Shareholders will have to postpone the celebration despite revenue growing by 18% in the first quarter of 2020 when compared to Q1 2019. The revenue hit N54.2 billion, thereby, surpassing the N46 billion 11 Plc recorded during the corresponding period of 2019. The drive of the revenue growth did little to influence the gross profit which fell from N3.6 billion generated in first quarter last year, to N2.4 billion this year's Q1.
The drop in profit occurred as cost of sales - which is the cost for production of goods or services - skyrocketed to N51.8 billion in the first three months of 2020, surpassing the N42.2 billion of Q1 2019. Meanwhile, Profit Before Tax took a nosedive, declining significantly to hit N1.2 billion in Q1 2020 from the N3.1 billion generated in the first quarter of 2019, the statement by 11 Plc published on Nigerian Stock Exchange (NSE) revealed.
Why 11 Plc's Revenue Is Bleeding
The oil industry has been struggling globally following a crash in oil prices. The oil industry had been hit by COVID-19 pandemic, as well as the oil price war between Russia and Saudi Arabia; the price war had resulted into both countries increasing their production and flooding the market with oil at a lower price as they compete for market share.
The COVID-19 pandemic also affected the demand for oil as countries implemented lockdown, restricting movements in order to curb the spread of the coronavirus. Speaking on the impact of the COVID-19 on the company's financial performance, 11 Plc said in a statement seen by AllNews, "The Covid-19 crisis continues to impact all businesses, with the effect expected to be more pronounced in the future."
11 Plc added that "At this stage, it is not possible to determine the financial impact of Covid-19 on our company given the lack of visibility on the end date of the pandemic or on how long it would continue to impact the Nigerian economy. The company has a strong Balance Sheet."