Since the takeover by the government of the marketing side of AGP in 1974, and the creation of GOIL, this company has and remains a prominent institution of the economy. As the best performing Oil Company in recent years, could you give us a brief overview of the company?
The company has grown stronger within the last 2 years, and this year the company gained 2% market share over all the others. We have done this even in the areas where we hadn't traditionally been the biggest in the market, and this is in the area of lubricants, engine oils. We were at number four but we are now the market leaders, commanding about a third of the market. This is the most competitive area because the government doesn't involve itself in the pricing of it. We are growing in the area of stations.
What is the current financial situation of the company?
The company has grown stronger financially except that the demand for money to do the business has also grown. Fuel prices have been increased by about 64% this year and thus means that working capital has to grow. This puts a lot pressure, which is normal in such situations, and we have to go to the banks to raise capital. But of course they do lend us because they know our reputation. A couple of years ago when you were here, we told you about some of the strategies we were pursuing, i.e. downsizing, and reducing staff. We implemented a large part of these measures last year, and it cost us a lot of money, to a point that we only break-even last year. But we believe that this year and in subsequent years, the company will become more profitable. We reduced staff by almost 200 people.
If you had not implemented these measures what would have been your projected profitability?
In fact, we could have had ½ 7 billion profits, but there were unusual items. The exchange loss for last year was so great and that wiped off some profitability and then the expenditure on staff reduction and other things took a lot of money.
Keeping that in mind, what is your projected profitability for this year?
This year could be more than ½ 7 billion because we expect the benefits of the cost reduction to be gained. Even though we still have about a quarter of that to be done this year. We expect to grow in total volume of business and the gains we are making in lubricants will also add more profitability to it. We expect to do better this year if the macro-economic situation favors us. We expect exchange rate to stabilize, inflation to go down and all other parameters to be under control. This year, with the increase in fuel prices we expect the Tema Oil Refinery to make full cost recovery. This will help to curtail rampant fuel shortages which happened so much last year and cost us a lot.
Is there a specific market shift towards any particular product?
We noticed a shift principally from gasoline to
diesel. 3 years ago gasoline used to be the principal
product for the country in terms of tonnage. But
there has been a change and so now diesel is the
main objective at the refinery. This is due to the
cost, in other words gasoline is high priced and
this has caused a shift to the lower priced diesel.
And then industrialization picked up in the mines,
as well as generation of electricity by thermals
that used diesel or crude oil. Then gas has seen
an up and down trend. People shifted to the use
of gas in vehicles but this fell when the prices
of gas increased. Gas is used more out of lower
price and availability and not due to any rules
from the Environmental Protection Agency. We hope
that this will come. However because now our refinery
processes gas that is not enough for domestic consumption,
the refinery has to import more gas in order to
keep pace with demand. |
How substantial are the imports?
I don't have the figure off hand but it is substantial. I think the bulk of it is imported. Last year, the refinery had some problems so it could not work round the clock. But by the end of next year, we will be net exporters of gas. We will have abundant gas and I think when that happens gas will be cheaper and the EPA will do something to encourage the use of gas. Fortunately for us we are still the market leaders for gas so when demand grows we benefit a lot from it.
GOIL is currently on the list of the Divestiture Implementation Committee. What is your comment on this process?
We are yet to state this categorically under the present government. Since the new government took over they have not made any pronouncements, policy statements on the divestiture of GOIL or certain companies. They have been involved with the macro policies but I am sure they will start dealing with the micro issues soon and that is when they will look at the divestiture issue. But whatever it is we believe that divestiture or no divestiture, the company will grow stronger. If it is divested and it brings in capital that may be cheaper than what is available now it will make the company more profitable. How the divestiture is to be done is something that may be discussed with government. Last year, the government changed the mode of divestiture from the way it was initiated before to divestiture through the Stock Exchange by floatation so that as many shareholders as possible would buy into the company. Whether divested or not, I believe that we will continue to grow. What is needed most now is cheaper capital. This is the company's biggest constraint.
How important is your demand for capital? Are you looking more towards foreign or domestic investment?
It could be foreign direct investment, but it could also be domestic capital. If we float shares, nobody is restricted. There is the need to expand or be pushed out of the market and we are competing with companies like Shell, Mobil, Elf, Unipetrol and some smaller ones. We plan to expand and even modernize the old stations. I think that is the most crucial; that is the old infrastructure, which is strategically located and has great potential. The experience we have had in modernizing some tells us that if we do that there will be a lot of increase in business. We will modernize them and find new locations for more stations and this will be very selective to complement the old ones.
What would be your final message to our readers?
GOIL is a very strong company, strong in what we are doing, with good staff ready to do anything to uphold the interest of the company. We have gone through changes and set ourselves a new vision because we want to be a very profitable and efficient company working in a very socially responsible and environmentally friendly and safe manner, getting enough returns for the shareholders. We have a vision to expand our business to neighboring countries in West Africa, and we want all those who can help us to achieve that by way of investment, trading relationships, joint ventures and any other ways are welcome. We would also like to have Ghanaians abroad investing in GOIL. We provide the necessary complimentary resources in terms of equipment so that we can have joint venture establishments or entities but at the end of the day they own it. We are basically a marketing company so anything that can sell through our system that can be profitable for both sides is welcome. |
