A strategic distribution partnership and the launch of a new service station are driving significant growth in key revenue-generating sections of Regency Petroleum Limited (RPL). The outcomes of the company’s third-quarter (Q3) 2023 performance demonstrate sales amounting to $278.96 million, a 39 per cent increase from Q3 2022.

“The opening of the Paradise Pen service station would have contributed to this along with our partnership with Jus Gas Distributors Limited,” Jerry Grant, CFO of RPL, disclosed. “Compared to our 2022 period the partnership with Jus Gas has seen our LPG section grow from 20 per cent of our overall business to approximately 30 per cent.”

The company experienced a 27 per cent rise in gross profit, climbing from $30.31 million to $38.52 million. This boost was attributed to increased sales during the period, despite facing higher associated expenses. Nevertheless, the gross profit margin saw a decline from 15.08 per cent to 13.81 per cent.

RPL experienced a 23 per cent increase in total expenses, reaching $20.88 million. This uptick was mainly attributed to additional fees associated with the opening of a new service station and other expenses related to being a publicly listed company. Costs related to hosting the first annual general meeting (AGM) and other promotional events also contributed to the higher expenses. Despite this, the company benefited from the reversal of a bad debt provision during the period due to the resolution of some accounts.

On the financial side, finance costs decreased from $5.73 million to $2.73 million, primarily because there were no commitment fees and loan interest as compared to the prior period. The profit before tax showed a slight increase from $16.89 million to $17.64 million. After accounting for a taxation charge, the net profit increased by two per cent to $17.27 million. However, due to an increase in the number of shares following the initial public offering (IPO), earnings per share declined from $0.015 to $0.012.

Year-to-date performance for January to September 2023 saw revenue grow to $642.24 million compared to $533.07 million in 2022.

“This represents a 20 per cent increase as more LPG and gasoline volumes were sold,” Grant stated. “A reduction in fuel prices over the period prevented an even higher increase.”

Indeed, elevated trucking expenses and declining fuel prices resulted in only a 6 per cent growth in gross profit, reaching $98.17 million. This led to a shift in gross profit margins from 17.38 per cent to 15.29 per cent.

The company’s strategic focus lies on volumes and gross profits, as it lacks control over market prices for petroleum products.

Addressing RPL’s outlook, CEO Andrew Williams noted that from the year-to-date perspective, the company, which has been listed for just under a year, faced delays in its service station construction.

Overcoming most of these hurdles, the Paradise service station opened as promised in the prospectus, albeit not on the initially specified timeline. The station is currently fully functional, with its launch having taken place on August 16. Operating for one-and-a-half months in the third quarter and a total of three months since mid-August, the company has successfully met its targets.

“Month over month as we go forward, each month has been our best month yet with regards to revenue,” Williams declared. “So as each month passes we are experiencing our highest revenue at that point.”

Williams reiterated that RPL’s primary revenue source has historically been its service station in Savanna-la-Mar, mainly dispensing 90 and automotive diesel. However, there has been marginal business growth based on the operations of that service station and the inclusion of LPG.

The company entered into a franchise agreement to expand its LPG operations, resulting in a significant growth in Q3. The opening of the new service station contributed to an 85-90 per cent increase in revenue, with the remaining 10-15 per cent attributed to the LPG franchise agreement. Bulk sales, particularly in relation to the franchise agreement, have significantly contributed to increased LPG revenue.

Looking ahead, the company is poised for continued growth in the fourth quarter.

“We have a number of projects on the table,” Williams revealed. “We expect to complete and start our Negril service station, having it fully operational by the festive season close to the end of the fourth quarter.”

The CEO also discussed a new service station project underway on Spanish Town Road in Kingston.

“We also have our Kingston project [with a] targeted timeline for completion within the first quarter of next year with all indicators [showing] that we are in line with that,” he added.

While mindful of past construction challenges and global economic uncertainties, Williams expressed confidence in the Kingston project’s progress. Despite external challenges, he foresees full operational status by the first quarter of the next year.

Emphasising a conservative approach, Williams expressed that the aim is to complete and fully operationalse existing projects before disclosing other potential expansions. Recognising the time-consuming nature of service station construction and approval processes, the priority is to complete the two service stations for increased revenues and profits.