Regency Petroleum Company YTD Earnings Up 77%

• Aided by an expansion in its footprint, which more than doubled topline growth, Regency Petroleum Company Limited (RPL) recorded a net profit of $60.14Mn for the six months ending June 2024, a 77.0% increase relative to the first half of 2023.
• Revenues grew 144.1% year over year to $886.56Mn as the company opened additional service stations, which translated into higher volumes being sold during the period.
• As revenues grew, the cost of sales also increased by 149.2% to $756.53Mn, which resulted in a 118% improvement in gross profit from $59.66Mn to $130.03Mn. However, gross profit margins narrowed to 14.7% from 16.4% as cost of sales outpaced revenue growth.
• Administrative and General Expenses grew 163.9% from $25.24Mn to $66.62Mn, largely due to its new service stations that have resulted in increased staff costs, depreciation charges, and security costs. That being said, operating profit increased 80.1% to $63.82Mn when compared to the $35.44Mn in the prior period.
• The company is continuing its expansion plan with its Spanish Town Road, St. Andrew service station, which is expected to be operational by September. This is following a delay in its Q2 timeline due to the need to settle final invoices related to the project’s cost. Additionally, RPL recently announced the opening of its first franchise location with DW People’s Choice Company Ltd in Whithorn, Westmoreland. The company will provide technical support and the sale of fuel to this service station, which now displays RPL branding.
• RPL’s stock price has decreased by 9.09% since the start of the calendar year. The stock closed Wednesday’s trading session at $2.20 and currently trades at a P/E of 44.0x, which is above the Junior Market Distribution Sector Average of 16.3x, suggesting that the market is already pricing in expectations of future earnings growth given its expansion plans.

(Sources: JSE and NCBCM Research)