Company
Overview
ETERNA was founded in 1989
but started operation in 1991. It was converted to a public company in 1997.
This change culminated in the listing of its shares on the Nigerian Stock
Exchange in the following year. ETERNA
manufactures lubricants and petrochemicals, and sells crude oil and imported
petroleum products. It is the sole
licensee of BP-Castrol lubricants in Nigeria.
Investment
Thesis
The lubricants business segment has witnessed a
stable revenue growth. Lubricants sales increased by 31.3% compared to the
previous period's figure of 41.3% on a 3-Year Compound Annual Growth Rate (CAGR)
basis. Lubricants produced 28% of Profit Before Tax (PBT) despite accounting
for less than 5% of total revenue. In addition, it has a better gross profit
margin of 29.7% compared to 0.8% of crude oil sales. Its PBT and Profit After
Tax (PAT) margins stood at 13.2% and 9.4% respectively compared to 8.3% and
5.1% of the year before.
ETERNA's total debt dropped
6 percentage points to 16.3% of total assets from 22.3%. Operating profit
covered interest obligations 5.9 times while cash flow from operations covered
it 0.6 time. Debt obligations may exert pressure on the company's short-term
liquidity or result in the accumulation of more debts because most of its loans
are short-term in nature.
We
are of the opinion that ETERNA has
manageable debts; sales revenue is rising notwithstanding the low profit
margins.
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