Operational costs reduce BNOCL profits

The state-owned Barbados National Oil Company Limited (BNOCL) group recorded a “marginal” $1.05 million profit in its 2023 financial year, with management blaming the reduced income on “significant operational challenges”.

In the financial year ended March 31, 2023, the BNOCL group’s gross revenue surged by 35.5 per cent to end the year at $674.2 million. The sale of refined petroleum products accounted for $595.6 million – 88.3 per cent – of this higher revenue.

However, the bad news for the group was that operating expenses almost matched revenue, increasing 37.1 per cent over 2022’s figure to end the 2023 financial year at $652.8 million.

“The major contributor was an increase in the overall cost of refined product to $607.1 million in the current year compared with a cost of $445.2 million in 2022. This represented an increase at 36.4 per cent when compared to the previous year and was attributable primarily to generally higher costs per barrel for all refined products,” the company reported.

The challenging year was detailed in the 2023 annual report message from the group’s board of directors.

“The 2023 financial year was one of the more challenging periods in BNOCL’s history due mainly to both global and socio-economic factors. Against this backdrop, the board of directors is particularly pleased that the company succeeded in maintaining one of its most important operational tenets; that is, the continued security of supply of energy products over the financial year 2022-23.”

“This mandate has been a critical element of the company’s existence as it has been a primary objective and one of BNOCL’s defining standards over the years. The financial success of the group was marginal, although BNOCL recorded total comprehensive income of $1.05 million.”

“This marginal return underscored the significant operational challenges experienced by the company over the course of the fiscal period 2022-23,” board members added.

The company explained that its rebound from the operational and financial challenges associated with the COVID-19 pandemic “was negatively impacted as the downstream sector also suffered from ongoing cashflow issues stemming back to the COVID-19 period”. “This has resulted in a high level of long term receivables which has, in turn, become an impediment to the implementation of some of the group’s strategic and operational plans”.

At the end of the financial year 2023, BNOCL had total accounts and other receivables of $75.6 million, up from $69.2 million a year earlier. The majority was $50.3 million in trade receivables, followed by receivables of $11.4 million in value added tax.

The BNCOL group BNOCL comprises three wholly-owned subsidiaries – Barbados National Oilfield Services Limited (BNOSL), Barbados National Terminal Company Limited, and Barbados National Oil Holding Company Limited.

The $1.05 million in total comprehensive income recorded by the BNOCL group in the 2023 financial year was down from the $2.34 million profit earned in the previous year. BNOSL was the only unprofitable subsidiary, recording a net loss of $4.64 million in 2023 compared to a $2.57 million profit in 2022. BNTCL recorded a total comprehensive income of $6.10 million in 2023.

“The reduction in profitability at the group level was primarily due to losses incurred as a result of severe challenges in the natural gas supply chain which then resulted in significant increases in operating expenses in BNOSL in order to ensure continuity of supply,” the group explained.

“Profitability was also negatively impacted by a 41 per cent increase in the cost of utilising the Holborn terminal.”

The board of directors also reported that in the last financial year the BNOCL group “was required to spend significantly higher amounts on fossil fuels and spent almost $600 million on gasoline, diesel, fuel oil and asphalt feed for commercial, utility consumption and production”.

“This was a considerable increase from the previous years, when the expenditure was only $431 million, and did not include the quantum spent on liquefied natural gas (LNG) which also increased significantly,” they noted.

In the 2023 financial year, the company supplied 727 239 barrels of gasoline, 472 671 barrels of diesel, 1 115 711 barrels of fuel oil, and 4 364 728 gallons of LNG.

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