The Dangote Petroleum Refinery has assured prospective investors that a drop in crude oil prices after the end of the ongoing US-Iran war will not directly affect its profitability.
The Vice President of Dangote Industries Limited, Devakumar Edwin, gave the assurance on Friday amid concerns that a fall in crude prices could weaken the returns on investments in the refinery’s ongoing initial public offering.
Edwin spoke during a media tour and briefing at the refinery, where he explained that the company’s profitability was driven by refining margins rather than the absolute price of crude oil.
“The crude price will not directly have an impact on profitability. Because, let us say, you are a trader. You are importing stationery and selling. You want to have a 20 per cent profit margin. Whatever your import price is, you will add the 20 per cent and keep your profit margin.
“So, your import price is not going to affect your profit margin because you are focused on your margins. So, the same way, when the crude price goes up, our product’s price will go up. When the crude price comes down, the product’s price will come down,” he stated.
Edwin was responding to concerns over the possible effect of the end of the US-Iran conflict on crude prices and, consequently, the profitability of the refinery and returns to shareholders.
He, however, said the ongoing geopolitical crisis could temporarily boost the refinery’s profitability, not because of higher crude prices but because of disruptions to the supply of refined petroleum products.
