Vivo Energy's (VVO) pre-tax profits slumped by 64 per cent to $42m (£33m) as coronavirus-led mobility restrictions took their toll on sales volumes. In April, the Africa-focused fuel retailer saw its volumes fall by as much as 70 per cent in some countries, with the aviation and marine sectors particularly badly affected by the crisis. Total revenue fell 7 per cent to $4.6bn.
This fall in demand and the oil price sent Vivo’s inventories up, which had to be subsequently written down. This, plus the sale of excess stock at lower margins in a bid to reduce inventories, hit Vivo’s gross cash profits by around $15m. Vivo cancelled or deferred around three quarters of its May supply, which along with a recovery in demand has mostly returned inventory levels to their normal position at the close of a period. But owing to the largely fixed nature of Vivo’s operating costs, these lower gross cash profits dealt a significant blow to overall profitability. The company also recorded a free cash outflow of $156m, compared to an outflow of $27m over its prior first-half period.
Vivo awaits the outcome of an inquiry by the Morocco Competition Council into the country’s fuel distributors. The regulator held a hearing last week and Renaissance Capital analysts speculated that Vivo could be subject to a maximum penalty of around $160m, which amounts to a tenth of its Moroccan revenue. The company says that it has “at all times conducted its operations in accordance with applicable competition laws, rules and regulations”.
Broker Numis forecasts full-year 2020 pre-tax profits and earnings per share of $148m and 5.8¢ respectively, rising to $268m and 11.9¢ in 2021.
