Dalol Oil S.C, one of the youngest private oil companies, suffered a loss of 3.5 million Br in the past fiscal year.
The report was announced last Saturday, December 23, 2017, at Global Hotel, located along Sierra Leone Street, during its sixth annual general assembly attended by nearly one-fourth of its 1,200 shareholders.
The past year was unsuccessful for the Company as its annual sales plummeted by 34.5pc generating 621 million Br revenues from 43 million litres of fuel, 57,762 litres of oil and 0.2tns of bitumen sales at its nine operational stations.
Dalol, one of the country’s 22 oil retailers that possess 800 stations, retailed 43 million litres of fuel, half of its target, out of the 3.5 million tonnes imported by the country for two billion dollars.
The Company ended up in a cash strap resulting from dwindling sales of fuel, oil and bitumen, tight credit sale terms of the Ethiopian Petroleum Supply Enterprise (EPSE) and strict credit policy which led to the contract termination between its partners for seven stations.
“Unclaimed cash from sales was also among the challenges faced by the Company,” said Dereje Walelgne, chairperson of the Board of Directors as well as a major and founding shareholder of the Company.
Three years ago, it managed to seal the deal to supply bitumen to Tidhar Excavation & Earth Moving for a road project extending from Wingate, in Kolfe Keranyo district, to Ferensay Legasion, Arada district, for 39 million Br. But Tidhar paid only 10 million Br.
Even though the Company won the court case against Tidhar in August 2015, it could not receive the payment from the judgement debtor as all of the company’s properties were under court injunction, owing to the corruption accusations by the Federal Ethics & Anti-Corruption Commission on Tidhar and its major shareholder, Menashe Levy.
In addition to Tidhar’s case, Dalol has 14 million Br which it was unable to collect, reads the report. It is also currently proceeding with court cases charging four customers for an unpaid amount of 13 million Br.
Despite a decline in Dalol’s expenses by four million Br to 16.4 million Br last year, it could not revive from its losses. Its fixed and liquid assets have reached 51 million Br and 90 million Br, respectively, exceeding its 83.3 million Br debt.
The nine-year-old company, named after the lowest point in the Afar regional state, reported 41 million Br paid and 64 million Br subscribed capital during its latest assembly, which was overwhelmed by its shareholder’s discontent.
The cause of shareholders’ disappointment was the loss the Company incurred after it reported profits for three consecutive years. Last year, it netted 400,000 Br profits, down from three million Birr and 8.5 million Br in 2014/15 and 2013/14 fiscal years, respectively.
In its first year of operation though, Dalol incurred a loss amounting to 1.3 million Br, followed by a 5.6 million Br loss in the subsequent year.
Issues related to securing land for stations and depots, the cost of setting them up and the supply of oil products were seen as primary causes for the deficit.
Additionally, in its latest reports, the Company attributed the shortage of working capital as the major source of the loss. Last year, the Company availed shares worth 22 million Br to escape the liquidity crisis, but to no avail.
Along with the forex crunch and lack of capital, the lowest profit margin from fuel retail was another hurdle for the Company, according to the Board Chairman.
Currently, the fuel-retail companies have a profit margin of eight cents a litre. This rate was set in 2015, 25 years after the last amendment.
‘‘As the profit margin of fuel is low, our profits mainly come from sales of oil and lubricants. Yet, this was also not realised for the shortage of foreign currency and liquid resources throughout the year,’’ the chairman said. ”Therefore, we could not sell the products in bulk.’’
In general, last year was tough for the Company.
‘‘Every challenge has a limit, but our’s have surpassed that limit,’’ said a senior executive of the Company.
Shareholders like Temamu Abajebel, a shareholder from Jimma with 100 shares worth 100,000 Br, echo the executive’s sentiment.
“Had I invested the money in property nine years ago, I would get a 20 million Br profit now,” said Temamu, who believes the Company’s incompetent employees are responsible for the loss.
“As a last resort, it has to replace the workers with those who can aggressively do the marketing,” he commented.
To dodge the challenges of the liquidity crunch, the Company took a 10 million Br overdraft loan from Enat Bank S.C, while also deciding to sell shares worth 22 million Br. Additionally, it plans to enter a joint venture agreement with another company, according to Tadesse Girma, CEO of the Company.
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