MRS Oil Nigeria Q2 lube profit stays low

Nigeria’s MRS Oil Nigeria (MRS), a unit of pan-African conglomerate MRS Holdings, saw profit stay unusually low in the second quarter as costs continued to outpace sales.

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

Its lube unit’s gross profit of 53.07mn Nigerian Naira ($127,000) fell by 78pc from the same period a year earlier to the second lowest level in more than seven years.

The lowest level was N22.62mn in the first three months of the year.

Profit rose from the first quarter even as sales fell. Costs fell even more.

The improvement was relative.

The lube unit’s gross profit margin recovered to 6pc in the second quarter, from 2pc in the first three months of the year. It had previously averaged more than 30pc in the five years to 2021.

The slump in profit margin reflected the sharp rise in costs since first-half 2021. The period coincided with the surge in base oil prices in Europe because of tighter-than-expected supply.

Europe and Russia are usually the key sources of base oils supplies for the Nigerian market.

Tight supply in 2021 partly reflected European refiners’ low operating run rates because of weak diesel margins.

Tight supply in 2022 partly reflected refiners’ increasing production of diesel because of their high margins.

Europe base oils exports of around 21,000t to Nigeria in the first five months of this year were down more than 40pc from almost 37,500t during the same period last year.

A drop in shipments from Russia to Europe compounded the tight availability.

The depreciation of Nigeria’s currency over the past year added to the rise in costs.

MRS' lube unit accounted for 2.4pc of its total gross profit in the second quarter. The share was down from 16.7pc the same period a year earlier and from an average of more than 35pc over the three years to 2021.