Wrap Text
Operational Update – Afric Oil
EFORA ENERGY LIMITED
(Formerly SacOil Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1993/000460/06)
Share Code: EEL
ISIN: ZAE000248258
(“Efora” or “the Company”)
OPERATIONAL UPDATE – Afric Oil
Efora, the South African based independent oil and gas company, is
pleased to provide the following update on Afric Oil, the wholesale fuel
distribution business in which it holds 71% interest.
Highlights:
-Significant improvements in working capital management, including
recovery of R14m debt from customer
-Considerable progress in implementation of cost saving initiatives
-Appointment of a new Interim CEO
-Restructuring of Zimbabwe business delivering volume growth
-Agreement with new tier-one supplier and advanced discussions with a
second
As announced in the Company’s interim results issued on 30 November
2017, the focus of Efora since completing the acquisition of Afric Oil
on 31 May 2017 has been on seeking to implement cost savings and
operating efficiencies to ensure the business is positioned to
effectively compete in the competitive wholesale market, and is on a
stable footing to deliver long-term, sustainable growth for Efora.
To that end, the core areas identified for review have been as follows:
supplier agreements, volume and margin improvement, restructuring of the
Zimbabwe business, logistics optimisation, working capital management,
and cost reductions. Efora is pleased to note that Afric Oil has made
progress in all of these areas throughout H2’17 and continues to
identify and implement actions to continue the process of optimisation
to underpin organic growth.
As part of the changes at Afric Oil, a new CEO has been appointed to
oversee the business. Khumbu Luthuli has become CEO of Afric Oil as of
1st January 2018, on an interim basis for a one year period. Mr Luthuli
has significant experience in the oil and gas space, including 10 years
with BP in a senior role as General Manager for the International
Major’s Distribution activities in South Africa, accountable for
delivery of logistical efficiencies and marketing. After leaving BP in
2005, Mr Luthuli joined Masana, a BEE entity in the capacity as Sales
and Operations Director. Since 2010, Mr Luthuli has been operating as a
strategic consultant for a number of leading companies including Puma
Energy and PetroSa, where he was responsible for developing the
downstream commercial strategy for South Africa’s National Oil Company.
Following an ongoing period of restructuring of the business in
Zimbabwe, sales volumes have increased markedly. The Zimbabwean
operating environment continues to be challenging and the management
team continues to implement efficiency initiatives in order to improve
margins and grow volumes.
In terms of marketing, Afric Oil secured an agreement with a new, tier-
one supplier, helping to diversify its supply and improve gross margins
by leveraging the localised network and product pricing of this new
supplier. Afric Oil also reports that it is in advanced discussions
with another highly reputable tier-one supplier and expects to conclude
an agreement in H1’18. By increasing the number of suppliers, Afric Oil
is expanding its optionality on pricing in its diverse product markets
across Southern Africa, all of which will contribute to improvements in
the gross margin.
Afric Oil has made considerable progress in improving its working
capital management during the period. The company is in advanced
discussions to secure working capital facilities for the business, with
an agreement for R40m due to be secured imminently and a further R100m
expected in the coming months. This working capital facility will
enable improved access to Basic Fuels Price (BFP) pricing which will
improve Afric Oil's competitive position.
Furthermore, following the implementation of a rigorous debt recovery
strategy and effective controls, the Company has delivered significant
improvements in debt recovery for the period. Pleasingly, Afric Oil has
recovered a sum of R14m from one customer, the amount of which had
previously been provided against.
Corporate and operational initiatives to achieve cost reductions have
focussed on restructuring the workforce, where required, to ensure it is
sufficiently streamlined in its local markets, rollout of new Enterprise
Resource Planning (ERP) systems and training of the sales team and
operational staff to ensure delivery of Operational Excellence for the
customer base. The Company expects to reduce operating costs by R10m in
2018 (10% of overall costs) and has set a longer-term target of reducing
overall operating costs by 20% in the next 2 years.
Commenting on the update, Efora CEO Dr Thabo Kgogo said: “Following a
six-month period of stabilisation since completing the acquisition of
our interest in Afric Oil, Efora has worked closely with the company to
identify the areas to improve the performance and long-term growth
potential of the business. This is a large task and the implementation
of these initiatives identified will be ongoing, however we are pleased
with the progress to date. We knew at the time of the acquisition that
we were entering a highly competitive and challenging market, and
therefore it is imperative to ensure Afric Oil is underpinned by sound
business fundamentals in order to remain competitive and deliver long-
term growth. We are confident that the corporate and operational
initiatives implemented to date have set Afric Oil on a path to steadily
grow volumes, improve margins and ultimately profitability.”
Sponsor
PSG Capital Proprietary Limited
17 January 2018
For further information please contact:
Efora Energy Limited
Damain Matroos
+27 (0)10 591 2260
Buchanan (Financial PR adviser)
Ben Romney / Chris Judd
+44 (0)20 7466 5000
About Efora
Efora Energy Limited is a South African based independent African oil
and gas company, listed on the JSE. The Company has a diverse portfolio
of assets spanning production in Egypt; exploration and appraisal in the
Democratic Republic of Congo; midstream project relating to crude
trading in Nigeria and material downstream distribution operations
throughout Southern Africa. Our focus as a Group is on delivering energy
for the African continent by using Africa’s own resources to meet the
significant growth in demand expected over the next decade.
Date: 17/01/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
