The State Trading Organization Plc. (STO) has released its 2023 annual report, revealing a net profit of MVR 1.09 billion in 2023, slightly higher than the MVR 1.07 billion recorded in 2022. This represents a 1.3% increase and marks the highest net profit in the group’s history.
Meanwhile, STO’s total revenue for the year amounted to MVR 17.1 billion, down 1.99 billion from the previous year. According to STO, revenue fell from MVR 19.1 billion in 2022, primarily due to a decline in the fuel segment and the discontinuation of the fishery segment.
Revenue Breakdown
The fuel segment, a significant revenue driver, decreased from MVR 13.4 billion in 2022 to MVR 13 billion in 2023. A drop influenced mainly by international fuel prices, STO states the impact was softened by increased demand for petroleum products. They said that discontinuing the fishery segment led to a revenue loss of MVR 1.6 billion.
Conversely, the shipping segment experienced growth, with revenue rising from MVR 308 million in 2022 to MVR 376 million in 2023, a 22% increase attributed to successful market penetration. The trading segment recorded a 4% decline, falling from MVR 3.04 billion to MVR 2.9 billion, affected by reduced performance in sub-segments such as construction and PCs. However, the gas segment saw a 13% revenue increase from MVR 223 million to MVR 252 million, while the insurance service segment achieved a 19% rise, growing from MVR 436 million to MVR 519 million.
Gross Profit and Strategic Management
Despite the reduction in total revenue, the group achieved a record gross profit of MVR 3.5 billion in 2023, up from MVR 2.7 billion in 2022, marking a 30% increase. According to STO, effective cost management, strategic planning, enhanced supplier negotiations, and improved cost of sales drove this performance.
STO said the fuel, gas, and shipping segments contributed to this gross profit. Notably, the fuel segment saw a 3% increase in fuel quantity sold, maintaining volume growth despite lower international oil prices. The gas segment also rebounded strongly, benefiting from reduced international gas prices.
Net Finance Cost and Global Economic Impact
STO reports facing significant challenges in managing net finance costs, which increased by 19.7% compared to the previous year. STO said the rise was primarily due to higher receivables from State-Owned Enterprises (SOEs), necessitating extended payment terms to suppliers and additional reliance on financing facilities.
Global economic conditions, including inflation and rising interest rates, further exacerbated these finance costs. Nevertheless, STO offset some of these increased costs through strategic investments and effective financial management, ensuring operational stability.
Financial Position and Liquidity
The group maintained a solid asset base, with an asset balance of MVR 13.9 billion in 2023, up from MVR 13.8 billion in 2022. Despite the transfer of MIFCO, which reduced property, plant, and equipment by MVR 383 million, this was offset by acquiring additional land to convert non-performing assets into more viable investments. The group continued to invest in treasury bills and term deposits, which were expected to yield higher future returns. Trade and other receivables increased by 16% to MVR 5.2 billion, primarily due to higher receivables from SOEs. The highly liquid cash and equivalents balance improved to MVR 1.7 billion at the end of 2023, up from MVR 1.4 billion the previous year.
Enhanced Liquidity and Equity
Due to increased receivables from SOEs, the group extended payment terms to suppliers, increasing trade and other payables to MVR 3.7 billion in 2023. However, settling bonds and early loan repayments reduced loans and borrowings by MVR 775 million to MVR 3.8 billion. The group’s liquidity improved significantly, with working capital increasing from MVR 482 million to MVR 1.6 billion in 2023, bolstered by the transfer of MIFCO.
Positive Cash Flow
Operating cash flow improved dramatically from MVR 141 million in 2022 to MVR 1.7 billion in 2023, driven by cash profits from continuing operations and MIFCO. The group generated positive cash flow from investing activities amounting to MVR 2.8 million, compared to a negative MVR 1.6 million in 2022, primarily influenced by MVR 917 million from the transfer of MIFCO. Cash outflows from financing activities totalled MVR 741 million in 2023, compared to a gain of MVR 1.5 billion in 2022. Consequently, the group reported net cash and cash equivalents of MVR 1.6 billion for the year.
