Regency looking towards a better year two
MORE THAN a year after its listing on the stock market and a more than one-third spike in annual sales revenue, Regency Petroleum Company, RPL, is bullish on business in 2024 amid expansion.
After delays, the petroleum marketing company has commissioned two new service station outlets that CEO Andrew Williams says will serve to boost the company’s revenue flows even further on the heels of a 36 per cent increase last year.
“Significantly, our revenue sources did not change, while we were expanding. We were relying on the one location at Great Georges Street in Savanna-la-Mar along with our LPG business. Now that Paradise and Negril are open it will be a different ball game,” Williams said in an interview with the Financial Gleaner.
Regency listed on the market in November 2022 following an IPO that gave it nearly $300 million in cash that was used to fuel its expansion plans, and retire $110 million in debt.
The location at Paradise, Westmoreland, on the outskirts of capital town, Savanna-la-Mar, should have come on stream in February 2023, but logistical delays pushed the timeline to August 2023 while similar problems pushed back the commissioning of the Negril location to January 2024, Williams said.
Amid the delays, the company saw its profits decline by 18 per cent. Williams said RPL has had to endure additional costs in its first full year after listing, while still footing the bill for the delayed opening of the additional outlets.
At year ending December 2023, Regency reported $928.76 million in total revenue, up from $681 million in 2022. But net profit skidded from $56 million to $46 million.
Notwithstanding the drop in earnings, Williams asserted that the company’s performance was ‘exceptional’ because of the improved sales.
“We had an exceptional year” but “despite the rise in revenues, we had increased fees associated with being listed on the junior market, in addition to professional fees such as auditing and legal services.” The latter fees related to “contracts associated with the expansion,” Williams said, including new plans to enter Kingston.
The company is planning to open a gas station at Spanish Town Road in Kingston, next door to the Trench Town Fire Station, and will be the only service station for two kilometres in any direction. Regency will be redeveloping a gas station that was closed during the 1970s.
After acquiring the land, Regency secured $200 million in loans from GK Capital to finance the infrastructure. The new station is expected to be commissioned in June.
Williams says now that the Negril and Paradise petrol stations in Westmoreland are fully operational and with the Spanish Town Road due to come online i n three months, the company would be concentrating on the efficiency of the operation to extract maximum value from the recent expansion.
“After Trench Town opens in June, we’ll have four locations that are fully operational. We’ll be watching that for two or three quarters so that we can properly assess the flows and realise the level of profits that we’ve been projecting over the past year or two,” the Regency CEO said.
He says the Paradise has been performing to expectations. That plus the boost expected from commercial expansion in Savannala-Mar underpins the company’s outlook for improved earnings in 2024, he said.
“There are 54 lots slated for development in that subdivision. We are the first movers, so to speak. We’re already meeting our targets without that additional development,” Williams said.
Regarding the LPG side of the company’s business, Williams said the partnership with distributor Jus Gas is projected to boost sales volumes. Regency plans to grow the LPG business organically in a push for more market share, he said, but offered no specifics on what the plans entailed.
Rivals in that space include IGL, Petcom and FesGas.
“With our pricing and service, we have been able to be competitive in the commercial LPG space. That franchise arrangement with Jus Gas has helped a lot as we’ve found them to be committed partners, as we target customers such as hotels, institutions, restaurants and bakeries,” Williams said.
He added that the company had no intention of neglecting the more capital-intensive domestic LPG market but has found that the commercial segment moves more volumes, efficiently.