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BOST’s turnaround takes shape; makes GH¢163m profit

The Bulk Oil Storage and Transportation Company Limited (BOST) made a net profit in excess of GH¢163million last year, compared with a net loss of GH¢291million registered in 2020.

This represents an over GH¢451million improvement in the company’s financial performance during the period.  Details of operational results are shown in the table below.

Statement of Profit or Loss for the year ended 31 December 2021

Income 2021(in GH¢000) 2020(in GH¢000) Change(in GH¢000) % Change
Revenues 1,121,664 632,659 489,005 77.3%
Other income 19,980 15,326 4,654 30.4%
Finance income 1,712 1,445 267 18.5%
Total Income 1,143,356 649,430 493,926 76.1%
Expenditure
Cost of sales 659,341 410,742 248,599 60.5%
Administrative expenses 228,012 208,761 19,251 9.2%
Finance cost 6,915 20,083  (13,168) -65.6%
Tax expenses 88,370 300,861  (212,491) -70.6%
Total Expenditure 982,638 940,447 42,191 4.5%
Net Profit or loss for the year 160,718  (291,017) 451,735

Total income increased by GH¢493million, or 76.1 percent, to GH¢1.14billion in 2021 from GH¢649million in 2020. This increment was largely influenced by volume and price increments in Petrol and Diesel sales, as well as an increment in BOST Margins from GH¢211million in 2020 to GH¢380million in 2021.

Even though income increased by 76.1 percent, total expenditure incurred in 2021 amounted to GH¢982million as compared to GH¢940million in 2020 – resulting in an increase of 4.5 percent or GH¢42million. This marked improvement in cost-efficiency was because of a 60.5 percent increase in cost of sales, which resulted from more than anticipated increases in import costs and depreciation of the Ghana cedi.

Financial position

Non-current assets increased from GH¢1.46 billion in 2020 to GH¢1.49billion in 2021 on net book basis. This represents an increment of GH¢26million or 1.8 percent, and was influenced by acquisition of lands, capital repair of storage facilities etc.

Current assets increased from GH¢350million in 2020 to GH¢583million in 2021. This represents an increment of GH¢232million or 66.3 percent, and was driven by 78.7 percent and 57.7 percent increases in inventory values and trade receivables respectively.

Current liabilities increased by 6.5 percent from GH¢1billion in 2020 to GH¢1.065billion in 2021. This was largely due to increases in current tax provision from GH¢8.42million in 2020, or 940.5 percent, to GH¢87.66million in 2021. Non-current liabilities declined by1.3 percent, or GH¢16.17million, from GH¢1.27 billion in 2020 to GH¢1.25 billion in 2021. This decline resulted from payment of long-term loan obligations.

The company’s liquidity position measured by its current ratio improved from 0.35:1 to 0.55:1 from 2020 to 2021 respectively. Details are shown in the table below:

Financial position as at 31 December 2021

2021(in GH¢000) 2020(in GH¢000) Change(in GH¢000)  % Change
Non-current assets 1,491,129       1,464,619           26,510 1.8%
Current Assets 583,249          350,673         232,576 66.3%
Current liabilities 1,065,574       1,000,879           64,695 6.5%
Non-current liabilities 1,256,831       1,273,000          (16,169) -1.3%
Liquidity Ratio 0.55  : 1 0.35  : 1        

In what is a significant change of fortune, the company also drastically reduced its trade liabilities from US$624million in 2017 to US$12million as of June 2022.

The marked rise in profit after tax, according to Managing Director (MD) Edwin Provencal, is the result of prudent management and hard work by all members of staff and the Board of Directors over the past few years. “Since we came in 2017, we have gradually been generating value for BOST, and the hard work is paying off,” he told the B&FT in Accra.

“We have brought back trust and credibility, and we are on the verge of extracting the real value from BOST,” Mr. Provencal said, while referencing the mounting challenges that confronted the state-owned company before he took over as MD in September 2019.

Since then, the company has seen significant improvements in its operations – increasing its revenue earning assets from 34 percent in 2019 to 95 percent in 2021. This, coupled with internally implemented operational policies and cost-cutting measures, has paved the way for BOST to increase its shareholder value, Mr. Provencal added.

Operational Efficiency – Repairs and rehabilitations

He said repair work on 12 storage tanks and rehabilitation of the Tema-Akosombo pipeline, in addition to revamping river barges, have been completed; thus enabling BOST to reduce its barge turnaround time from 7 to 2 days. Similarly, the tanker-loading turnaround time has been reduced from 4 hours to 1.5 hours. Our storage capacity has been improved by repairing 12 out of the 15 decommissioned tanks, he said. This has led to drastic improvement in Operational Efficiency. All these investments toward improved asset utilisation have propelled the company into increasing its revenue to over GH¢1billion – the highest in the last four years.

As a result of this, he said, financial institutions that previously did not want to work with BOST are now willing to back it to effectively deliver on its mandate. “The banks that didn’t want to do business with us have reconsidered their stance and are now willing to give us the needed support for our operations. At the end of this month, one bank will extend credit lines of about US$25million to us,” he said.

Since 2016, the company’s revenues have crossed the billion mark twice; in 2016 when it reached GH¢3billion but recorded its highest loss ever of GH¢458million, and GH¢1billion in 2021.

However, in 2016 its administrative expenses alone peaked at GH¢538million compared to the GH¢228 million last year – a marked reduction that Mr. Provencal noted was achieved in an environment where “if you try to make things work very well, you are fought against by invincible forces”.

He further credited improvement in the company’s liquidity and performance to the increase in BOST Margin on petroleum products, from three pesewas across 2011-2019 to six pesewas in 2020.

Brighter days ahead

With a solid foundation in place, he said, the company is on the verge of being able to deliver on its mandate of making profit and maintaining its strategic social role of ensuring petroleum security.

His confidence stems from the fact that in the first six months of this year, January to June, BOST’s trade revenue has exceeded GH¢1.2billion. “This year’s trade revenue is about GH¢1.2billion already as at July 31 2020. We are hoping that by end of the year we will have crossed the two billion mark,” he said.

Apart from this, he disclosed that a US$400million pipeline infrastructure from Accra to Kumasi, when completed, will help reduce prices at the pump drastically, and all Ghanaians will benefit tremendously. Asked how this will impact the tanker owners, he said: “Due to the displacement of tanker drivers, the Honorable Minister of Energy Dr. Matthew Opoku-Prempeh has directed that a proportion of equity be assigned the Tanker Owners to ensure meeting the Ghanaian content requirement.“The fine details are being worked on as we speak”.                                                           Similarly, plans are underway to connect Burkina-Faso and Ghana via pipelines – and this will position the oil storage and distribution company to take advantage of the continental free area by increasing exports to the country’s landlocked neighbours.

The pipeline will come complete with a leak and intrusion-detection system in place. BOST, which will control a minimum 20 percent stake in the pipeline with the rest going to private sector partners, added that the military will be equipped with drones to patrol the infrastructure.

Mr. Provencal lauded all stakeholders – including the Office of the President, Ministry of Energy, Ministry of Finance, Auditor General, National Petroleum Authority (NPA), Public Procurement Agency (PPA), National Security, Economic and Organised Crime Office (EOCO) and others – for their consistent support toward BOST’s transformation journey.

 

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