Nigeria Ardova's lube unit sees Q2 loss

Nigerian oil products distributor Ardova’s lube unit turned to a loss in the second quarter of the year in the face of surging costs.

The company’ lube unit turned to an operating loss of 428.0mn Nigerian Naira ($1.0mn) in the three months to end-June, from an N897.7mn profit the same time a year earlier.

Ardova produces and distributes lubricants manufactured at its blending plant in Apapa. It is also the sole distributor of Shell lubricants in Nigeria for the automotive and industrial sectors.

Profit fell as costs surged by more than 50pc in each of the last five quarters.

The surge in costs mirrored a similar trend among other local lube distributors and blenders.

The higher costs reflected a range of factors including surging base oil prices and rising freight costs.

The depreciation of Nigeria’s currency versus the US dollar compounded the impact of rising overseas costs.

Buyers had to turn to sources like the US to cover more of their base oil requirements this year in response to a drop in availability and higher prices for supplies from Europe and Russia.

Nigeria is typically a major outlet for Group I base oils of Russian origin in view of their competitive prices compared with supplies from Europe and the US.

Ardova’s sales also rose strongly since first-half 2021. But they still lagged the pace of the rise in costs. The 19pc rise in sales in the second quarter of the year contrasted with a 51pc rise in costs.

The lube unit’s loss cut its operating profit margin to 5.9pc in the first half of the year, from 17.6pc during the first three months of the year.

The margin was up from 4.3pc in 2021 and down from 6.2pc in 2020.