Regency Petroleum Company Limited (RPL) Earnings Call Transcript & Summary

Welcome to the Q1 2024 Earnings Call for Regency Petroleum Company Limited, JSE ticker RPL. This quarter RPL would have done 121% better in revenues than Q1 of 2023, and that's a big deal. So the team is here today to give context around the performance of the company over this quarter. So we encourage you, regardless of the platform that you are listening or watching from, to enter your questions in the live chat and those will be addressed during the question-and-answer section with CEO, Andrew Williams; and Financial Controller, Jerry Grant, both of whom are here today to take us through the performance of RPL for Q1 2024. Please join me in welcoming Mr. Andrew Williams, CEO of RPL.

Thank you, Renate. Welcome to another earnings call -- for LGI for facilitating this process with our operator. Let us begin. Heavenly Father, we come to you once more this day. We thank you for life. We thank you for all your blessings and mercies upon us. We thank you for this company and what it has been doing and what you have planned for it. We surrender to you, oh father, and we ask that your will be done in our lives and within this company. We thank you for this opportunity once more to share with our shareholders and the audience of the performance of the company. I would thank you for this avenue in which we can share it. We continually give you thanks, oh father, and we ask your blessings once more to this company and each and everyone of us. In Jesus' name we pray. Amen. Welcome again to our earnings call for Q1 2024. And this Q1 report for this year, for 2024, is a significant one. It's a quarter representing [Audio Gap] of what has been projected. Now for Q1 2024, we had an increase, as Renate said earlier, in our revenue [Technical Difficulty] amounting to $404 million for the quarter that -- from that we had 16.93% gross margin increase and this is quarter-over-quarter. For Q1 2024 comparison to Q1 2023, we had a $68.5 million. Gross profit is 111% increase in our gross profit. Profits before tax $33.76 million, our asset base increased by $721.47 million and our shareholders equity $468.55. So the shareholders' equity had a 15% increase. Asset base had a 60% increase. Are these increases -- it's not a surprise to us -- the organizational structure and the management of the company. We have always stated that the company is in a growth stage, and we should, based on our target, experience these levels of increases, which we actually are, a bit better than what we forecasted our target. So it's a confirmation, however, of our organizational structure, our management team and our performance and our projections and how accurate we are with that. So I'm quite pleased to say that our machinery is well in tune in terms of our forecast. So we're not just going out making promises, we are stating figures that we would not experience -- I would not experience. So it is -- I mean, this also builds confidence, I would say, in our shareholders, in our audience and general public who really -- who observe our operations and see the company's operations -- follow the company's operations from time to time and even our interviews and what we actually forecast our project. So we are pleased to announce these figures and [Technical Difficulty].

So our apologies in the signals. Andrew is having some technical difficulties on his side. We will continue to wait. We'll wait a bit to see if that returns. But in the meantime, we will shift over to the financial...

[Technical Difficulty] that are accounted for increases in our revenue significantly. And we're also increasing...

Andrew?

Yes.

Our apologies. I'd just ask you to repeat what you were saying last, you were frozen for a bit. So you can repeat and then continue.

Alright. Alright. Okay. So we are -- as I just stated, we have experienced what we have projected over the past quarter. And this helps to build confidence in the company and also confirms that we have an oiled machinery in place in terms of our management team, our organizational structure and our method of operations. We have projected significant increases in revenues and profits, and we have though completed a quarter where we have experienced all of these, what we have been speaking about. And we have more to experience, more increases to experience. So we are pleased and this confirms that what we project -- what we have projected is actual figures that we can actually realize. We're not just speaking about increased price, increased our revenues and the company is not realizing it. So we have strategies in place, and we have methods of which we do our evaluation and has proven that's come to fruition and we will continue on that path. Now we have opened our service stations, our Westmoreland service station, which would have been Paradise, Negril -- Negril and Paradise -- last year -- last quarter last year and Negril first quarter of this year, which contributed to the increase in revenues. We also had an 8% increase in our LPG -- bulk LPG primary fields, Negril station opened, Spanish Town Road station should be opened in Q2, if all goes well. And we have added increase in our earnings per share from $0.14 to $0.24. Our asset base grew, as I stated earlier, 60% and our profit before tax increased by 71%. So that -- you're talking about quarter last year -- Q1 last year 2023 and Q1 this year 2024. We had our AGM, which was in Q2, just to briefly mention it. So we started out the year pushing on. So we had our annual report on our AGM in the first quarter, which is a significant accomplishment also for the company to have had that in the beginning part of the year, in the first quarter. So I will now -- I will -- just the highlights. So I will now move on to my #1 CFO, Jerry Grant.

Okay. Thank you, Mr. Williams. As our CEO has said, this is our best quarter so far. Our sales has increase to $404 million. Could you put this slide up so I can [indiscernible] that we're going to 121% increase and that's a tremendous increase quarter-to-quarter, really proud of that achievement. Gross profit increased by 111%. So even though we have significant cost of sales mainly due to increase trucking costs, we were able to keep and to increase our gross profit over the quarter by -- from $32 million to $68 million. Operating -- profit before taxation, the best ever also, $33 million increased by 71%. As we are a listed company, we're still benefiting from the taxation. There is no taxation charge to the figures, so the profit before tax and net profit remain the same. Earnings per share increased by 71%, it has moved from $0.014 to $0.024 over the quarter. Can I see the next slide, please? Thanks, thanks, thanks. Okay, let's look at our balance sheet. Our cash [equivalents] still pretty strong. It decreased by approximately $10 million, 21%. It is showing $39 million at the end of Q1. Our property, plant and equipment together increased $434 million, change of 33% increase. Significant increase in our accounts receivables. Let me elaborate a little and the increase is due mainly to deposit and lease, but in particular, the Negril location. Trade receivables remained pretty good, manageable, nothing to concern ourselves. Our long term borrowings in Q1, that's the last year, 2023, there was [indiscernible] which has been reflected in the Q1 for 2024 year. Accounts payable about 53% increase due mainly to the amount of gas station being in operation. Trade payables is being managed and I'm not concerned there at this moment. Our cash from operation, cash flow of $21 million for the period. And cash used by investing activity, that is due mainly to the property, plant and equipment activity there for $5,924 million at the end of Q4. So those has been attributable to the activity in the gas station. And cash used in financing activity, mainly due from the lease, nothing significant here. Our equity, normal share capital. Retained earnings increased by 19%, so that is going in our accumulated profits, showing $208 millions. So that looks pretty good. Okay. Mr. Williams, will now look at the continued outlook.

Thank you, Jerry. Okay. So regarding our outlook for the balance of 2024 and moving -- in the short term 2025, we intend to complete, first of all, our Spanish Town Road location and have it in operation. We have seen our results from opening of Paradise service station in August of last year and Negril, January of this year -- with mid-January. So basically, for the first quarter, would have had 2.5 months of operation of both service stations -- new service stations, which we can see the results from that. Now we want to experience revenues and profits from having these 3 service stations opened, which will be Spanish Town Road, Paradise Pen, and Negril. So our outlook in the very short term is to have these 3 stations operated and experienced 2 quarters of revenues and results. Now we plan to expand in our automotive fuel via service stations across the islands. So as -- how do we say, if something comes on the table similar to Spanish Town Road, yes. But currently, we are not actively seeking out any form of construction of our service station under 4 regions, petroleum currently. We're not seeking out any form of construction. We are -- to expand -- and as I always say, the approval processes will take time. So yes, our outlook, we are always seeking room of forms of expansion for the automotive fuel. Regarding LPG, we will allow it to grow organically, and we have strategies in place -- that we have employed certain strategies for the company to grow. And as I said, we are pleased to see the results. And it's proved that whatever we have in place on our operations, our strategies that we have in place. It has proven fruitful and successful especially in these times when you find that most -- the majority of companies in Jamaica are not experiencing these massive increases in revenues. So we are extremely pleased to be experiencing that. And again, it proves that what we have in place in our planning, especially for our [Technical Difficulty] which we have been doing. And this is a clear indication that he has carried us through -- he has a significant input in the operation of the company, for us to be experiencing what we are projecting -- predicted and targeted, and this is based on calculation. So it is not a simple creation, we have reason -- I must say this is actually a result of our faith in Him also because it's not a situation where we just go and say "We're going to experience revenues and profits and we're going to pray to God and have faith in Him and that profit will increase, no." We actually look to Him to guide us in our operations. And I can't stress on that enough because quarter-after-quarter to come and quarter-after-quarter gone by our faith has carried has through and our dependence on Him to lead us has carried us this far. And it's only more encouragement for us to continue along that path. And we will see continued success, I'm sure, because we are a Jamaican-owned company, and we want to see our country grow and we want to see our economy grow. We have -- I can mention of that and we have our membership card that has been in the making for some time now, but it's coming to the closely -- coming close to the end now where we will -- in a very short order, have our membership cards, which will be our Platinum membership card and our Gold membership card. Now one of the first requisites would have to be, you have to be a Jamaican to have one of the cards. Jamaican means not always citizen, but just Jamaican by birth or Jamaican birth. So we want to include each and every Jamaican to have -- because we already listed on stock exchange where Jamaican-owned company, by members by Jamaican citizens, Jamaican residents. So we want to further include each and every one and to be a part of Regency Petroleum and I mean, feel [indiscernible] within Regency by becoming a member of Regency and experience benefits that we will have. There are no more benefits that can have these either on this platform early, but we have our website, www.iplgas.com, where you can visit the website and you will see all offerings of each kind of each category of cards. So we have the Platinum and the Gold card. A lot of benefits from that. And easy sign up, you can sign up online, easy registration, easy sign up, and this is exclusive for Jamaicans. That's for, I mean Jamaicans abroad, Jamaicans locally. But we are a Jamaicans-owned company. I want our Jamaicans to benefit significantly from this venture that we have put in place. And we are a pioneering company. We always try to pioneer first well technology. And thus far, it has been going quite well for us. We have a number of ventures, which has 99%, 100% of them have proven very successful for the company. And we will continue on that path also. So briefly, in a nutshell, for the -- looking at the company's outlook, we will continue our service stations where we are. We will continue our operations of the 2 recent ones. We look forward to the opening of Kingston very soon. And we have -- we are always scouting out for approval processes. But in the short term, short to medium term, meaning the end of 2024 to first and second quarter of 2025. We just want to experience profits and revenues from these service stations. Again, if something comes on the table, and we will aggressively, as long as it's feasible for the shareholders and for the company, we will aggressively, I mean, look at it and do our due diligence on whatever venture that might come forth if that happens to aid in our expansion of the company. So we're looking forward to a very, very, very bright future. And again, we have all our trust and confidence in the Lord to carry us through. So thanks, everyone, for allowing us, for attending this earnings call, and we're looking forward to the question and answers now and question and answers to come in the future.

Thank you so much, Andrew. And congratulations to the RPL team for a great quarter. Clearly, the results are showing that you have done well and that the support is there from the Jamaican public. So congratulations. I'm going to add both of you back to the platform and reminding the persons that whichever platform you are watching from, you are invited to add your questions or comments to the live chat and those will be addressed during this section -- during the question-and-answer section. If it is that you're watching it on the replay, then feel free to still add it in the comments section and those will be passed on to the RPL team for them to address it at another time.

So I'll start off with the first question from [indiscernible], and he is stating that he notices that the Negril café is not yet open. Why is that?

Okay. For Negril, it is a rented location for one. It's a leased location property. However, there is still some construction processes being done by the landlord with regards to facilitate the cafe per se. And we also have some equipment that we are awaiting. So it's a combination of both things. So we should soon, I would say, very short order. We should have definitely in Q2, we have the cafe open.

Okay. Thank you for that. The next question is, what is the expected timeline for the next gas station? I take it that this is the Spanish Town Road location, which you would have mentioned before?

Q2.

Q2, yes. All right. What is the size of the team at RPL now in terms of the number of employees?

Okay. So we have different categories of employees. We have from pump attendants to supervisors, administrative in-house staff, accounting, operations, sales. So currently, we have staff completed over 77 members of staff. Currently, more to come with the new service station and others.

Okay. And I take it that, that question is likely connected to the admin and general expenses because as we know, there would have been a significant increase there. So there -- in previous earnings calls, you would have spoken to their needing to be an increase as you prepare to open additional service stations, and that is what we're seeing come to fruition now, right? So the next question actually is, how do you intend to manage the admin and general expenses, and I'll ask both of you to chime in on this one?

Okay. So these additional administrative expenses and general expenses, these were forecasted prior to the open of the service stations. If anyone who have been following us, they would remember that we said, boy, we will engage -- I will employ a lot of technology in our system to reduce and to maximize and make it more effective of our personnel, our staff. So basically, we have strategies in place that as we can see in Q1, we have had opening of Paradise service station and Negril service station, with these additional expenses, but yet we were able to experience huge revenues and huge profits from these. So we have that strategy in place. I don't want to get too much into our -- what we have in place. But yes, we have forecasted and we have been doing our diligence for each -- so we have a strong planning team in place, which I am a part of. And as we grow, I will forecast our growth and I will forecast our expenses, our forecast and see how we can maximize our profits by cutting our costs in whatever we are making our company more cost effective. We can benefit from that because the more you save is the more you earn. So we have that policy, that's the secret. So the more we can see more effective is the more the company will earn. And we use that model operation.

Thank you for that, Andrew. Jerry, do you have anything to add there?

I think Mr. Williams has done a good job and he answered the question.

Okay. Fantastic. So the next question is, does RPL plan to pursue any inorganic growth opportunities for 2024? I think, again, you would have addressed this in your remarks, Andrew, where you stated that for 2024, it is not that you're closed off. If an opportunity arises, then you look at it. However, it's not the plan. Correct?

Exactly. It's not right. So right now, we just want to have these services. We don't plan to do any form of construction or anything to require any inorganic growth. But if some comes on the table, we'll definitely look at it, and we'll be in touch with you guys.

All right. So [indiscernible] is saying that she has seen -- or yes, she has seen 2 gas stations in Westmoreland thus far. What factors are considered with the location of stations?

Well, again, I will not -- we have strategies that we use to identify our locations, especially at where we are now in terms of the company's growth. So there are certain locations that we look at, and we will say, no, we are not interested in that or those particular locations currently, but later on. But currently, as I said, we have a strong planning team in place. So we already have certain locations. We have a map actually with locations that we are seeking out to develop in. And we have our reasons as to why we want to be located in these locations with regards to our service station. With regards to the LPG, island-wide, we go organically, we just take it parish and parish and grow organically with LPG. But for the automotive fuel, we have certain locations that we are interested in. I don't want to go too much into it why. But yes, we have a strategy in place, and it has been working so far for us also. So just follow us and you'll see how far we go next.

All right. Fantastic. Do you expect any delays in the opening of the Spanish Town location -- Spanish Town Road location?

Well, for Q2, no, we have -- we are, I would say, at this point in time, 80% complete. We have all equipment underground. So we just to tie up -- we basically have tied -- I don't know how much you know about construction, but when it comes down to finishes, that's very time consuming. So anybody who has experience in construction, know that. So we are in the finishing stage now. So we don't anticipate it will go over Q2 based on our experiences. And I must say that having this gas station completed in Q2 will be a record-breaking timeline for Regency, because this will be completed in less than a year as opposed to the other 2 service stations which probably went over close to 2 years. So I can say that I'm pleased with our team, our management team, our structure we have in place, our machinery in place, and it's proven successful so far. And regarding the mix, as usual, we should be in the timeline. I don't anticipate any disappointments with that, delays with that.

So it sounds to me, Andrew, like you have -- like the team is learning the lessons from the previous stage of applying what you have learned. So it is making it more efficient as you go along, which is good.

Exactly.

All right. So what do you make of the seeming market saturation of gas stations and its impact on potential future growth for RPL?

We always welcome competition. Competition is what drives the market. And our company, we always welcome the competition. Again, our strategies that we have in place -- I don't want to keep on saying our strategy in place, but we have proven ourselves to be competitive. We have proven ourselves to be successful with regards to increased revenues and profits and what we have been stating over the past year. We're actually coming to realize what we have been projecting, which I'm quite pleased with. And we will stick to what we have our strategies and our plans, what we have in place. And we have plans, I mean, for the long term, which are -- our plans for the short, medium and long term. So -- and everything has been proven successful so far. So we always welcome competition. And as I say, we are Jamaican-owned company. We have -- we are pioneer ventures -- pioneer new -- we have new things that we have introduced to the sector and the industry, which has proven successful for us, and we will continue to do so. So this is what will set us apart from -- and to be able to exist within this industry successfully.

All right. Beautifully said. Devon is asking if your brokers are actively working on the APO, you know that the DOJ has announced that the junior market cap will increase to $750 million.

Okay. Well, again, we have to be prudent in our decision-making. So we -- yes, the availability of funds is there, the avenue is there to raise funds, but we have to be prudent in what we do. So we are a growing company. We have to ensure that if we are going to do an IPO, we have something -- we have a projection for it, which I said prior to -- which I keep saying that we just want to have this service station. If something comes on the table and we need to go IPO, bond or whatever we need to do for the funding, yes, definitely. We look at that currently. There's no active planning on that right now. But if something comes on the table, definitely, we will look at that. So we don't want to take money just to take. We don't have any need for expansion or we have any avenue to expand on currently apart from the close of what has happened already.

So I would ask Jerry to also just to add to that in terms of the additional funds that would have been received last year, because I think sometimes with the questions about the IPO and additional fund raise, there may be persons who are not aware of the funds that would have come in last year and how that has impacted the company so far?

Yes. The second tranche of the funds that was discussed in the latter quarter of last year, which the main purpose was and is to really complete the construction of the gas station. What we have to understand and investors have to understand also that IPO there are implications for new shares in the market, the right issues, additional whatsoever. So they are in the advantage, disadvantage to look at the whole picture. Advantage is right for that and not just rush into things just because you have the opportunity to do an IPO, it have implication for everything of the shares for everything. So you have to take all these things into consideration. We are making decision on behalf of the company and also of the entire shareholders.

All right. Thank you for that, Jerry. So there were a few other questions around capital raise. So I'll just take those as well since we are in that line of conversation. [indiscernible] is asking, can shareholder rights be maintained when the company considers its next capital raise in the coming future? I think he expounded on it, I'm sorry. In a case where cash isn't available for distribution, can shareholders be given shares instead?

No, in a case where -- could you repeat that?

In a case where cash -- sorry. In a case where cash is not available for distribution, can shareholders be given additional shares instead? [indiscernible], is this more of a dividend question? Please clarify and let us know.

Yes. I think he is referring to dividend and that's a fair question. I think that's a question that the Board would have to consider...

And just on that, we definitely plan to pay dividends in cash. I mean, as soon as we have these service stations operating and so forth because the Regency will be a dividend paying company for sure. You just have the stage that we are now, and we don't want -- it's not a situation where we plan to wait for years for our dividend. We just listed on the stock exchange from 2022, 1.5 years now. And -- we plan to pay dividends -- I mean, dividends very soon -- we plan to pay dividends when the time is good. And it's not for too long. It's not a long term. It will not be in the long term.

All right. I'm sure many persons are happy to hear that. All right. Our next question is, how does one become a partner with RPL for a gas station?