TOL makes U-turn in profitability

TOL Gases has made dramatic U-turn, tripling its pre-tax profit despite the operational challenges and stiff competition from within and outside the country.

The listed industrial and hospital gases firm generated 1.37bn/- in pre-tax profit in 2012 compared to 409.95m/- in 2011. 

TOL Board Chairman Harold Temu said in a statement in Dar es Salaam that the company performance over the last three years has been encouraging, “This is a good indication that the company is on the right track towards full recovery.”

TOL, the first firm to list on the Dar es Salaam Stock Exchange (DSE) in 1998, is the only listed company on the bourse that has never paid dividends to its shareholders. The gas company offloaded its shares on the market through an initial public offer at 550/- per share.

The company incurred accumulative loss of 2.9bn/- in three consecutive years—2008, 2009 and 2010—with the share price hitting a historic low price of 200/-, far below the 550/- IPO price. 

But, TOL’s shares closed the market yesterday at 270/-, soaring steadily since mid last year’s 220/- when the firm announced profit and the share demand started rising as supply dwindled.

Zain Securities Chief Executive Officer Raphael Masumbuko described the financial results as much higher than what many stockbrokers had anticipated. 

“The results are highly encouraging because a 694 per cent rise in net profit in a single year is no small fit…we are optimistic that firm will maintain the pace of profitability growth,” Mr Masumbuko said.

TOL net profit grew seven folds to 950m/- in 2012 from 120m/- of 2011, an increase of 694 per cent. Orbit Securities Head of Corporate and Market Research Godfrey Gabriel said TOL share demand started for over a year, an indication that investors were expecting good results this year.

“TOL share demand is on the rise although there is no matching supply…this gives a hint that by the year end, price might have gone up to between 300/- and 400/-,” Mr Gabriel said, adding: “If the firm maintained the profitability growth pattern in the next two to three years, it may walk out of the financial doldrums it has experienced in the last one decade.”

Financial analysts, however, said the profitability level needs to be measured by the company’s revenues from the core business rather than including income from the asset sale. “If the profit is from the sale of assets then there is nothing to smile about,” a Dar es Salaam based analyst said.

TOL generated 612m/- from other income in 2012. Chances are that the other income might have come from the sale of by-products and not assets.

The company in 2012 completed the construction and commissioning of a state-of-the-art food grade carbon dioxide manufacturing plant in Rungwe, Mbeya, with projection to lift production capacity by over 200 per cent, enabling the firm to meet the entire domestic and export demand in East Africa and South African Development Community regions. 

TOL has the largest air separation plant in East and Central Africa, capable of producing 31 tonnes of industrial gases per day.
Source: The Daily  News, reported by Abduel Elinaza from Dar es Salaam, Tanzania

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