ADNOC Distribution, the UAE’s largest fuel and convenience retailer, announced on Tuesday its first quarter 2020 financial results, recording an underlying EBITDA of AED629 million, a growth of 4.7 percent.

In a statement, the company noted net profit was AED 400 million for the quarter and cash flow generation "remained strong" with free cash flow of AED533 million.

"The company continues to focus on ensuring the safety of its employees, customers and local communities as it responds to COVID-19 and, despite the challenging operating environment, remains resilient with a strong balance sheet, delivering on its smart growth strategy with seven new stations opened in Q1 2020," the statement noted.

During the first quarter, ADNOC Distribution responded swiftly to the evolving needs of its employees, customers and local communities, by introducing a number of health and safety measures, including new services to enhance customer experience and protect staff and customers during the current COVID-19 pandemic, including the daily cleaning of its sites and free car interior sanitisation with every auto wash.

The company’s retail fuel business posted strong operational performance, with retail fuel gross profit growing by 13.1 percent year-on-year in the first quarter, led by higher margins and volume growth in the first two months of the year. Although retail fuel volumes declined by 1.9 percent in the quarter, due mainly to the business impact of COVID-19 in March, commercial fuel volumes remained stable year-on-year.

The company has shown resilience in Q1 2020, with underlying EBITDA - excluding inventory losses and one-offs - of AED 629 million, an increase of 4.7 percent compared to the same period last year.

It explained that while revaluation of current inventory stock in the commercial business, following lower oil prices, and prudent provisioning in the current environment negatively impacted reported EBITDA and net profit for the first quarter by AED73 million, most of the year on year decline comes from an unfavourable base period which benefitted from one-off reversals and recoveries of AED132 million.

"Despite the unprecedented market conditions and the uncertainties ahead, ADNOC Distribution remains in a strong financial position and is well placed to navigate the challenges posed by the COVID-19 pandemic," the company statement affirmed.

"It has ample liquidity to weather the immediate impacts of COVID-19 and is exploring new growth opportunities presented by the current environment. As of 31st March 2020, the company’s liquidity was at AED8.0 billion in the form of AED5.2 billion in cash and cash equivalents and AED 2.8 billion in unutilised credit facility," it added.

Commenting on the first quarter results, Ahmed Al Shamsi, Acting Chief Executive Officer of ADNOC Distribution, said, "In Q1 2020 we have shown strength and agility as a business. We are especially thankful to our dedicated frontline colleagues who have played a vital role in this effort by providing a lifeline to communities around the country that rely on our services 24 hours a day to meet their essential fuel, food and grocery needs. In turn, we have taken and will continue to take, every step to ensure their health, safety and wellbeing."

"By understanding our customers’ needs and adapting our products and services, while they adhere to social distancing, we have built a stronger relationship with our communities, one that we hope will last long into the future after this pandemic is over," added Al Shamsi. "We also remain committed to our shareholders by protecting our business through the application of robust business continuity measures and the strengthening of our business resilience, in readiness to return in a position of strength and continue our growth trajectory when the effects of the pandemic subside."

The company successfully opened seven new stations in Q1 and construction is well advanced on a number of additional stations that will be opened in the coming quarter. Since announcing its new ‘On-the-Go’ community station concept in November 2019, five ‘On-the-Go’ stations have already been brought into operation by April 2020, with more coming soon.

During its recent General Assembly meeting, held virtually due to social distancing measures, ADNOC Distribution announced that its 2020 dividend policy is set to continue with an increase of 7.5 percent to AED2.57 billion, after a 62 percent increase in the 2019 dividend to AED2.39 billion. Looking further ahead, the company’s shareholders approved amendments to the dividend policy for 2021 onwards, setting an AED2.57 billion dividend for 2021 and a dividend equal to at least 75 percent of distributable profits from 2022 onwards.

The changes to the dividend policy approved by shareholders demonstrates its confidence in the company’s future prospects and ability to deliver sustainable growth, providing investors with longer term visibility on the company’s dividend strategy.

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