9 March 2014

Ethiopia: Dalol Sinks in Loss for a Second Year in Raw

Managers of the cash-strapped Dalol Oil SC, the second publicly-owned oil retail company, had only little in the form of pleasant news to tell their nearly 1,000 shareholders, who gathered on Saturday, March 8, 2014, at the Global Hotel, located along the Sierra Leone Street, around the Lancia area, on their second annual general assembly meeting.

But they hope for a brighter future with a major deal made this year. The deal is made to supply Bitumen to a road project in Addis Abeba, from Wingate, in Kolfe Keranyo District, to Ferensay Legasion, in Arada District, by TIDHAR International, an Israeli company, which costs 38 million Br. Company managers, therefore, hope that this will save the Company from declaring yet another loss this year.

Dalol has declared a net loss of more than 6.9 million Br in two years, a sum of the loss for the current and the last year. In the 2011/12 fiscal year, Dalol's loss amounted to 1.3 million Br, whereas the report released on Saturday's general assembly meeting disclosed that the loss of the 2012/13 fiscal year has jumped to 5.6 million Br.

The fourth local oil distributing company and second to Yetebabarut Oil to have a large number of shareholders base from members of the public, Dalol was established in 2009, named after the hottest place on earth located in the Afar Region. When it closed its public offering of shares in 2012, the Company could have only mastered 80pc of the 64 million Br shareholders subscribed to. Its lack of working capital comes partly as a result of many shareholders holding on to the shares they have subscribed but yet to pay.

Dalol commenced operation two years ago with a 40 million Br paid up capital and seven filling stations scattered across the country, competing with multinational companies with a strong market hold such as Total Ethiopia and Oil Libya, as well as well leveraged ones such as National Oil company (NOC-Ethiopia), largely owned by the Saudi business tycoon, Mohammed Ali Al-Amoudi (sheikh).

Faced with shortage of working capital and bureaucratic red-tape that had delayed its early entry to the market, Dalol suffered a 1.3 million Br loss during its first operational year in 2012/13. This loss compelled directors to propose the amendment of the Company's bylaws to list the limitation put on an individual shareholder from owning more than 20pc of shares in the Company.

Although the issue of amendment was to be raised on the third extra-ordinary general assembly meeting, which was scheduled to take place on Saturday, along with the second regular general assembly meeting, but was postponed to an unspecified time since those present did not establish quorum.

During Saturday's general assembly meeting, however, shareholders looked disappointed with the contents of the report presented to them. What takes them by discontent was the declaration of profit for a second year in a row, about which some in the meeting repeatedly complained.

Lack of capital, foreign currency and human resource were the major impediments that blocked the Company from improving its dismal performance in the previous year, along with unpaid shares of 380 shareholders, Dereje Walelign, chairperson of the Board of Directors, told the shareholders.

One of the agendas was to decide on the fates of the unpaid shares. The general assembly decided to give the shareholders an additional one month, until April 8, 2014. But, if they fail to pay within the period, the shares will be sold.

"We expect the shareholders to pay the shares within a month," Selamawit Tiruneh, a member of the Board, said.

Some shareholders, like Tamiru Fesha, who came from Mega area of Borena Zone in Oromia Regional State, 663km, expressed their disappointment with the performance of the Company. Tamru paid 1.07 million Br, five years ago.

"That money could have brought me a nice interest if I kept in a bank and even more profits if I had invested on one of my investments," he said.

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