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ADNOC Distribution Q3 net profit slips, fuel sales rise

Oct 31, 2019
5 min read
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ADNOC Distribution, the UAE’s largest fuel and convenience retailer, said its third quarter net profit slipped by 1.7 per cent to AED549 million, while earnings rose on back of higher volumes.

The net profit slipped due to the absence of non-operational inventory gains achieved in Q3 2018, the company said without giving details.

Meanwhile, its underlying EBITDA (EBITDA excluding inventory gains) for the third quarter of 2019 grew to AED 698 million, an increase of 10.0 per cent compared to the third quarter of 2018, driven by higher volumes and improved cost efficiencies, ADNOC Distribution said in a statement.  

Total fuel volumes sold increased by 3.9 per cent in the third quarter of 2019 compared to the third quarter of 2018, driven by improvements in the core retail markets of Abu Dhabi and the Northern Emirates, as well as contributions from new stations in Dubai and growth in commercial volumes.

The company’s retail volumes were supported by marketing promotions throughout the summer months. Non-fuel retail gross profit also increased by 16.6 per cent for the same period compared to Q3 2018.

This was supported by the convenience store revitalisation program which offers customers an improved shopping experience, contributing to an uplift in average basket size of 6.5 per cent in Q3 2019 compared to the same period of 2018.

ADNOC Distribution’s Acting CEO, Saeed Mubarak Al Rashdi, said: “We have delivered strong results in the third quarter as well as the first nine months of 2019 and have demonstrated our ability to realise profitable growth, supported by an increase in fuel volumes sold, an enhanced convenience store experience and improved quality of service. Looking ahead, we are focused on the acceleration of our domestic network expansion, particularly in the Dubai market, and the growth of our non-fuel business.”

“Our recent marketing campaign offering free assisted fuelling has proven to be a success, both in terms of generating an increase in retail fuel volumes in the third quarter of 2019 for the first time since our IPO, and in better understanding our customers’ requirements. This, in conjunction with feedback from extensive customer engagement, has resulted in the decision of the Board of Directors to approve offering free assisted fuelling to all our customers, which we will implement beginning this Sunday, 3rd November. We trust this will be very well received by our customers as well as our investors as it will facilitate and strengthen our ambitious network expansion and volume growth targets. As a result of cost reductions and other initiatives, we do not expect this to have an impact on our profitability or dividend policy.”

“We remain dedicated to fulfilling the promises we have made to our shareholders and the local communities we proudly serve every day. The company has engaged with nearly 14,000 customers through focus groups and surveys. As part of the evolution of ADNOC Distribution’s offering, our company will launch a new loyalty program, ADNOC Rewards, before the end of the year, further enhancing our customer experience. We are well on our way to making ADNOC Distribution a world-class fuel and convenience retailer and look forward to continuing our journey in the UAE and beyond,” Al Rashdi said.

In the first nine months of 2019, net profit increased to AED 1.72 billion, an increase of 2.3 per cent compared with the same period last year. Underlying EBITDA (EBITDA excluding inventory gains) for the first nine months of 2019 grew to AED 2.06 billion, an increase of 10.6 per cent compared to the first nine months of 2018.

The company’s EBITDA margin has also shown continued momentum, reaching 13.7 per cent in the first nine months of 2019, up from 12.7 per cent during the same period last year. Free cash flow (EBITDA minus capital expenditure) generation was up 18.8 per cent year-on-year to AED 1.94 billion for the first nine months of 2019.

Non-fuel retail gross profit also increased by 12.2 per cent for the same period compared to the first nine months of 2018. ADNOC Distribution continues to focus on realising cost efficiencies, including across its supply chain and logistics operations, which has contributed to a 9.3 per cent reduction in like-for-like operating expenses for the first nine months of 2019 compared to the same period last year.

ADNOC Distribution’s priorities remain growth and shareholder returns underpinned by a progressive dividend policy. As previously announced, the company intends to boost growth in both its fuel and non-fuel businesses and has targeted EBITDA in excess of AED 3.67 billion by 2023.

In April 2019, ADNOC Distribution announced a new dividend policy, representing a 62 per cent increase in the annual dividend for 2019 (AED 2.39 billion or 19.10 fils per share) and 75 per cent for 2020 (AED 2.57 billion or 20.57 fils per share), compared to the 2018 dividend.

This would translate to a 7.3 per cent annual dividend yield for 2019 (based on a share price of AED 2.63 as of 30th October 2019). The company paid half of the 2019 dividend in October of this year and expects to pay the next half in April 2020, subject to board of directors approval.

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