ADNOC Distribution reports net profit of $108.92mn in Q1-2020

ADNOC Distribution announces new customer initiatives to combat impact of Covid-19

ADNOC Distribution introduces enhanced contactless payment solutions, daily cleaning of sites, and new car sanitization, fuel and grocery delivery services.
ADNOC Distribution introduces enhanced contactless payment solutions, daily cleaning of sites, and new car sanitization, fuel and grocery delivery services.

ADNOC Distribution announced its first quarter 2020 financial results, recording an underlying EBITDA of $171.27mn, a growth of 4.7%, while net profit was $108.92mn for the quarter and cash flow generation remained strong with free cash flow of $145.13mn. The company continues to focus on ensuring the safety of its employees, customers and local communities as it responds to Covid-19 and, despite the challenging operating environment, remains resilient with a strong balance sheet, delivering on its smart growth strategy with seven new stations opened in Q1-2020.

During the first quarter, ADNOC Distribution responded swiftly to the evolving needs of its employees, customers and local communities, by introducing a number of health and safety measures, including new services to enhance customer experience and protect staff and customers during the current Covid-19 pandemic, including the daily cleaning of its sites and free car interior sanitisation with every auto wash. To further protect customers and staff, the company has accelerated its digital transformation strategy in response to the current pandemic, providing customers with a seamless digital experience and enhancing the company’s position as a best-in-class fuel retailer. A key element has included enhancing its advanced Mobile Pay technology, which allows totally contactless refuelling and payment. As a result, customer uptake of the ADNOC Distribution Wallet, which includes Mobile Pay as well as the ADNOC Rewards programme, increased by more than 100,000 users in the first quarter of the year to over 730,000 users.

The company was also quick to launch a new ‘essential products’ range in its ADNOC Oasis stores, including fresh food, household and healthcare products, at low cost to help customers across the UAE. In addition, retail fuel customers across Abu Dhabi Island have had the added convenience of having their vehicles refuelled on their doorstep through ADNOC Distribution’s My Station, a new mobile fuelling service that provides services at a location and time of customers’ choosing.

The company has also introduced new complimentary deep cleaning and sanitisation of cars at select stations as part of its auto wash service. More recently, ADNOC Distribution launched an online home delivery service with select leading providers, of more than 1,000 of its Oasis products, including groceries and hot beverages for the convenience and safety of its customers. The service is already proving popular and has resulted in an increase in basket size for participating stations.

The company’s retail fuel business posted strong operational performance, with retail fuel gross profit growing by 13.1% year-on-year in the first quarter, led by higher margins and volume growth in the first two months of the year. Although retail fuel volumes declined by 1.9% in the quarter, due mainly to the business impact of Covid-19 in March, commercial fuel volumes remained stable year-on-year.

The company has shown resilience in Q1-2020, with underlying EBITDA (EBITDA excluding inventory losses and one-offs) of $171.27mn, an increase of 4.7% compared to the same period last year. While revaluation of current inventory stock in the commercial business, following lower oil prices, and prudent provisioning in the current environment negatively impacted reported EBITDA and net profit for the first quarter by $19.88mn, most of the year on year decline comes from an unfavourable base period, which benefitted from one-off reversals and recoveries of $35.94mn.

Despite the unprecedented market conditions and the uncertainties ahead, ADNOC Distribution remains in a strong financial position and is well placed to navigate the challenges posed by the Covid-19 pandemic. It has ample liquidity to weather the immediate impacts of Covid-19 and is exploring new growth opportunities presented by the current environment. As of 31 March 2020, the company’s liquidity was at $2.18bn in the form of $1.42bn in cash and cash equivalents and $0.76bn in unutilised credit facility.

Ahmed Al Shamsi, acting chief executive officer of ADNOC Distribution, said: “In Q1-2020, we have shown strength and agility as a business. We are especially thankful to our dedicated frontline colleagues who have played a vital role in this effort by providing a lifeline to communities around the country that rely on our services 24 hours a day to meet their essential fuel, food and grocery needs. In turn, we have taken and will continue to take, every step to ensure their health, safety and wellbeing.”

“By understanding our customers’ needs and adapting our products and services, while they adhere to social distancing, we have built a stronger relationship with our communities, one that we hope will last long into the future after this pandemic is over,” added Al Shamsi. “We also remain committed to our shareholders by protecting our business through the application of robust business continuity measures and the strengthening of our business resilience, in readiness to return in a position of strength and continue our growth trajectory when the effects of the pandemic subside.

The company successfully opened seven new stations in Q1 and construction is well advanced on a number of additional stations that will be opened in the coming quarter. Since announcing its new ‘On-the-Go’ community station concept in November 2019, five ‘On-the-Go’ stations have already been brought into operation by April 2020, with more coming soon.

During its recent general assembly meeting, held virtually due to social distancing measures, ADNOC Distribution announced that its 2020 dividend policy is set to continue with an increase of 7.5% to $0.70bn, after a 62% increase in the 2019 dividend to $0.65bn. Looking further ahead, the company’s shareholders approved amendments to the dividend policy for 2021 onwards, setting a $0.70bn dividend for 2021 and a dividend equal to at least 75% of distributable profits from 2022 onwards. The changes to the dividend policy approved by shareholders demonstrates its confidence in the company’s future prospects and ability to deliver sustainable growth, providing investors with longer term visibility on the company’s dividend strategy.

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