‘We’re still in growth mode’
WITH the commissioning of its 20th service station now in its rear view, and yet another in its network readying for opening next month, Future Energy Source Company Limited (Fesco) is positioned to realise even further growth in the current quarter and the upcoming calendar year.
While priming the Jamaica Observer for new developments, Fesco’s bullish CEO Jeremy Barnes explained that the petroleum marketer and distributor continues to explore growth opportunities that are “accretive” to its top and bottom lines, including partnerships that will add to the ease of convenience for customers to pay.
In late August the company welcomed a new service station in the St Catherine community of Kitson Town. In the upcoming month it will open its 21st service station in Port Maria, capital of the parish of St Mary, which is located on the tourism corridor between the parishes of St Ann and Portland.
“We’re still in a growth mode and we’re very pleased that our operating profit and EBITDA [earnings before interest, taxation, debentures and amortisation] numbers continue to grow strongly,” Barnes said, promising further, “There’s a lot more to come.”
Though guarded about the outlook on the new service station’s performance, citing competitive reasons, he outlined that it will provide customers with additional benefits and services and will become a destination in Port Maria.
“A lot of planning went into it…It will stand out amongst competitors, not just for its aesthetics but also for the value that it’s going to create…It will be accretive,” Barnes told Sunday Finance.
When asked about the prospects of new service stations, the CEO disclosed that there is a “strong pipeline of expansion”, stopping short of sharing the locations in which they will be established and explaining that Fesco is unable to comment until the developments are at a mature stage.
He is, however, optimistic that the new service stations will drive volumes in motor vehicle petrol sales, and expressed appreciation for the continued support of patrons as the company continues to grow.
Commenting on Fesco’s second-quarter performance which spanned July to September, Barnes noted, “It’s our best quarter! Our entire business is growing, as you can see. The real measure of our business is gross profit and throughput in litres, and both are growing every quarter.”
According to the company’s unaudited report for the period ending September 30, 2023, revenues grew by $231.50 million or 3.3 per cent compared with the corresponding period last year.
“Several factors affect revenue/turnover, with the supply price of fuel being a major component,” Fesco’s directors outlined in its report to shareholders, adding that while ex-refinery prices of fuel have fallen, the volume of sales has also increased significantly.
Gross profit, however, showed improvements, almost doubling from $190.18 million reported in Q2 2022/23 to $379.88 million in the period under review. And despite a 215 per cent jump in operating expenses, Fesco managed to increase its operating profit by over 40 per cent to $175.82 million.
For the period, the company’s net comprehensive income amounted to $158.69 milion, up from $129.29 a year prior.
Responding to a query about the contribution of the company’s new business line — Fesgas — to the company’s earnings, Barnes confirmed that it has added to the revenues but has, at the same time, resulted in increased depreciation and advertising costs. He further explained that the company would have done its research and so would have anticipated the rise in expenditure from customer acquisition activities, storage and depreciation.
Fesgas, the company’s liquid petroleum gas (LPG) product that is used for cooking, was launched in the summer.
“We are carrying some early stage business costs which are higher [than expected] but, given even that, we’re still producing better profits,” Barnes informed Sunday Finance.
“The price of LPG is less than motor vehicle petrol — less than half the price. The market for LPG is one-tenth the size of the market for transportation fuel, so when combine those two it won’t impact that heavily on revenue but it does impact the gross profit and expense structures,” he continued.
The CEO also credited the company’s partnership with digital wallet provider Lynk and e-commerce operator Giftme for increasing the visibility of the company, and with it the ease of convenience with which customers can pay.
“Fesco continues to monitor the moderating inflationary forces within the economy, the recent interest freeze by the central bank, the near full employment in many sectors of the economy, a resilient and expanding tourism product, among other factors affecting consumer consumption as well as our allocation of investment capital… The company remains mindful of opportunities for growth and further investment. Internal or self-funding via profit generation, profit retention at this time have proven to be the most efficient and cost-effective source of capital to fund growth,” the directors report outlined.
“Finally, the company will continue to make investments in real assets and equipment to support expanding its service station businesses, its industrial client business, and LPG business,” it concluded.