MRS Oil Nigeria’s Q3 lube profit mixed

Nigeria’s MRS Oil Nigeria (MRS), a unit of pan-African conglomerate MRS Holdings, saw third-quarter profit from its lube business improve from the previous quarter as lower base oils prices trimmed costs.

The depreciation of Nigeria’s currency versus the US dollar in recent months partially countered the benefit of lower imported cargo prices and added to buyers’ difficulty with payment of supplies.

MRS markets and distributes downstream fuels in Nigeria and produces lubricants at its blending plant in Lagos.

Profit fell from year-earlier levels as a drop in sales outpaced lower costs.

The lube unit’s gross profit rebounded to 153.3mn Nigerian Naira ($351,000) in the three months to end-September.

Profit was up from N53.1mn during the second quarter and the highest this year.

Profit was still down by more than half from N311.1mn during the same period last year.

Profit rose from the second quarter as a 5pc rise in sales contrasted with a 6pc fall in costs.

The lower costs coincided with lower base oils prices and improving base oils supply in Europe in the third quarter of the year.

European Group I prices fell by more than 10pc in the third quarter from the previous three months.

Base oils supply in the region improved following the completion of sometimes-protracted plant maintenance work and a seasonal dip in European lube demand.

Slowing economic growth compounded the drop in demand.

A pick-up in flows of Russian base oils to markets like Turkey and Mideast Gulf also displaced supplies in those outlets from markets like Europe.

The trend added to the rise in surplus shipments.

Buyers in Nigeria had previously turned to supplies of US origin in the first half of the year to cover their requirements.

Prices for supplies from that market are typically less competitive than prices for shipments from Europe or Russia.

The lack of alternative supply options curbed buyers’ leverage to target lower prices for the US shipments.

The recovery in European supplies in the third quarter of the year increased their supply options and cut their requirements for US supplies.

Lower costs helped to lift MRS’ lube unit gross profit margin to 16pc in the third quarter of the year.

The margin was up from 6pc during the previous three months. But it was still much lower than usual.