GOIL PLC, a leading Indigenous Oil Marketing Company (OMC) in Ghana, has made a noteworthy decision to maintain its dividend payment of GH¢0.056 per share for 2023. This move comes despite a dramatic 56 percent decline in profits, falling from GH¢123.9 million in 2022 to GH¢54.7 million in 2023. This decision carries several implications for shareholders, stakeholders, and market observers.
First and foremost, GOIL’s decision underscores its commitment to shareholder value. By keeping the dividend steady, the company aims to uphold investor confidence and signal stability amidst financial turbulence. This approach is particularly critical during times of declining profits, as it helps to reassure investors of the company’s long-term viability and dedication to providing returns.
Moreover, maintaining the dividend suggests that GOIL possesses a resilient financial foundation. Despite the profit drop, the company appears to have adequate cash reserves or a robust balance sheet to support this payout. This resilience is crucial in highlighting GOIL's capability to fulfill its obligations without compromising its financial health.
However, the significant rise in finance and operational costs raises some concerns. Finance costs have surged by an alarming 196 percent, driven by an increase of GH¢54.7 million. Such a steep rise typically points to higher borrowing levels or increased interest expenses, both of which could strain future profitability. Additionally, the 25 percent rise in operational costs indicates either inefficiencies or external pressures that the company needs to address promptly.
From a strategic perspective, maintaining the dividend could be a tactical move to preserve GOIL’s market position and investor relations. It might reflect management's confidence in a future recovery or an effort to keep the stock price stable in challenging times. However, this strategy's sustainability is key. Continuous profit declines or rising costs could eventually impact the company’s ability to sustain such payouts, potentially leading to liquidity issues.
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NBFC director, Retired SVP, Head of Trade Operations at First Abu Dhabi Bank (FAB), EX MD and Global trade ops head JP Morgan
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