GHANA OIL WALKS A TIGHT ROPE

Even for professionals tight rope walking is not an easy thing and so, watch out as Ghana Oil Company continues with some tight rope walking to the end of the current financial year.

According to interim results released recently, Ghana Oil is doing balancing act and succeeding so far after years of diverting much to new assets acquisition and its attendant gestation period.

In the first half under review alone, it invested GHc 169.6m in fixed assets acquisition compared to GHc 148.7m at the same time in previous financial year.

This led to 26.5% rise in financial charges paid to GHc 10.3m from GHc 8.14m and drastically reduced interest received from GHc 11.8m to just GHc1.83m.

Now, the thing is financial charges during the second half could grow at a faster rate if the leap in short term loan from GHc 1.76m to GHc 12.9m is anything to go by.

Unfortunately, that may financial charges growing as fast as other expenses,thus adding to the pressure that  resulted in only marginal increase in profit margin to 2.28% from 2.03%.

It was that marginal because, 49.5% rather strong increase in gross profit to GHc 309.4m was watered down to 38.2% rise in profit before tax to GHc 116.4m.

Hitherto, 23.5% growth in core revenue to GHc 5092.5m had been boosted by lower 22.1% increase to GHc4783.1m  in cost associated with its generation leading to the leap in gross profit.

Taking some shine off this strong performance was the 55.5% dive in Other income to GHc 13.3m driven by interest received near dry up and 35.7% increase in administration and selling expenses to GHc 196.0m.

The good news is that Ghana Oil can make its walk more comfortable in the second half by doing more to reduce its account receivable growth from the 31.2% to GHc537.5m recorded and perhaps, who knows, also find ways to grow account payable some more.

Mind you, the company is not short of cash, it is only just walking a thin black line that demands more balancing acts before new plants and machinery begin to deliver expected returns in full.

GHANA OIL: 1/2 Year GHcm
                           Dec 2018.    Dec 2017
Total income    5105.8.         4154.6
Core revenue    5092.5.         4124.7
Cost of sale.     4783.1.         3917.8
Gross profit.       309.4.           206.9
Sundry income.    13.3.            29.9
Admin etc cost   196.0.         144.4
Financial charges 10.3.             8.14
Profit b4 tax.       116.4.            84.2
Profit margin %    2.28.             2.03

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