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By Durrant Pate/Contributor

Automotive and cooking gas retailer Future Energy Source Company Limited (FESCO) achieved record numbers during its June quarter with all primary matrices showing record performance.

Net profit for the quarter surged 28.19 per cent to $148.4 million, or up $32.6 million from a year ago. Gross profit, meanwhile, amounted to $41.3 million, up 38.71 per cent or $115.1 million.

Operating profit is up 16.28 per cent to $185.8 million, coming from $159.8 million, and earnings before interest, taxes, depreciation and amortization (EBITDA) closed on $250.2 million up 26.56 per cent or $52.5 million. 

This quarterly performance reflects an increase in fuel sales in litres. FESCO recorded turnover of $7.78 billion, which reflects an 18.56 per cent or $1.21 billion year-over-year increase. Accordingly, FESCO’s year-over-year growth in turnover reflects significant increase in litres of fuel sold (all fuels including LPG). 

Several factors affect revenue/turnover with the supply price of fuel being a major component. For the quarter, fuel prices increased slightly for gasoline (87 Octane: $6.08 and 90 Octane $9.12) and remained relatively flat for both ADO and ULSD (ADO +J$1.06 and USLD -J$0.91). 

Main target achieved

During the review period, FESCO was able to achieve its main targets, which were to: 

·      Increase brand awareness for FESGAS™ as well as maintain and enhance its market share (measured in litres of LPG) for both domestic and commercial usage; 

·      Increase its company-operated service station footprint (FESCO Hayes) and increase overall fuel sales measured in litres; 

·      Increase profitability, specifically as it relates to operating profit (EBIT), operating cash flow (EBITDA) and net profit; 

·      Acquire additional service station and LPG assets to enhance its retail and commercial distribution going forward; and 

·      Establish additional filling plants to further enhance its LPG distribution. 

The network of FESCO branded service stations remains 21 island-wide, representing an addition of a DOCO service station, FESCO Hayes, and a separation from the network of a DODO service station in Whithorn, Westmoreland.

Big jump in expenses

Operating expenses shows a big jump of $226.5 million, up $89.9 million or 65.83 per cent. This expansion of expenses directly reflects the expanded: 

·      Operating locations including the additions of: FESCO Kitson Town, FESCO Hayes, FESGAS Bernard Lodge and FESGAS Naggo Head; 

·      Asset base which includes increased operating LPG and service station assets; 

·      Operational scope (which now includes increased retailing and manufacturing); 

·      Early stage new business costs including but not limited to: a. business acquisition; b. property acquisition and development costs; and c. business integration costs. 

For the quarter, staff costs went up by almost 50 per cent to $75.0 million, up $25.7 million from the $49.3 million booked last year, reflecting the expansion of staff and is consistent and reflective of the company’s expanded operations. These costs are relatively efficient as they are only 33.1 per cent of overall expenditure (2024: 33.1 per cent vs 2023: 36.1 per cent) and only 18.2 per cent of gross profit (2024: 18.2 per cent vs 2023: 16.6 per cent). 

FESCO incurred finance costs of $37.4 million, which reflects interest costs related to its debt/bonds etc, interest income and foreign exchange gains. Book Value or Shareholders’ Equity as at June 2024 increased to $2.4 billion, up from $2.25 billion as at March 31, 2024, exhibiting increased profitability and profit retention.

FESCO remains sufficiently liquid

The company remains significantly, and sufficiently liquid represented by net current assets of $284.2 million (March 2024: $154.4 million) and cash and cash equivalent balances of $312.4 million (March 2024: $315.7 million). FESCO’s  current ratio as at June 2024 is 1.25 versus 1.11 as at March 2024. 

As at June 30, 2024, the company’s Debt to Equity (D/E) (long term-static) is 0.61 versus 0.68 from March 31, 2024. The improved ratios (current ratio and D/E) reflect long term debt repayment of both principal and interest, and increased shareholder’s equity (both undistributed profits). 

FESCO has commenced construction of its new service station on Spanish Town Road, FESCO Oval. This will be a company-owned company-operated service station for increase retail presence within the Kingston and St Andrew region. Completion will take approximately 15 months and it is sent to open in September 2025.