Adnan Adams Mohammed
A finance expert has critiqued the press release by the management of the Bulk Oil Storage and Transportation Company Limited (BOST) to correct a misinformation captured in the SIGA State Owned Enterprises 2020 Report.
In the said press release, BOST challenged that, the SIGA Report claiming that BOST recorded a loss of GHC400 million was not accurate. The company claim it rather recorded an operating profit before tax of GHC30million.
The release issued last week and signed by the Managing Director, Edwin Provencal, indicated that, “the revaluation which was a deliberate decision to enhance the reporting of the company led to a deferred tax obligation of GHC292,935,973 compared to the net loss of GHC291,017,758, a difference of GHC1,918,215 (Appendix 1). The increase in the value of the revalued assets also resulted in increased depreciation charges which further reduced the bottom-line or the profit for the year. But, the ‘deferred tax obligation’ aspect beats the financial reporting knowledge of the finance expert. This led him to ask questions in awe.
“I don’t understand this analysis, especially, on the unpaid taxes obligation. Is that not illegal?”, the Former Executive Director at Standard Chartered Bank, Alex Mould quizzed in reaction to a part of the press statement of BOST quoted above. “Unless he is talking about timing differences between financial reporting and tax reporting, that is, defered tax liabilities; which I do not think he was.”
Mr Mould, also a former CEO of National Petroleum Authority and GNPC further quizzed that, “Investment mark-to-market losses will reflect in impairments. How will you be taxed, that is, asked to make a tax payment for a unrealized gain in any asset revaluation?.”
Below is the full press statement:
FOR IMMEDIATE RELEASE
RE: BOST Records GHC400 Million in Losses-SIGA Report
April 10, 2022, Accra:
The management of the Bulk Oil Storage and Transportation Company Limited has taken notice of a series of publications making the rounds on several online portals suggesting that contrary to an announcement by the MD, Edwin Provencal, that BOST has made an operating profit before tax of GHC30million, a report from SIGA indicates BOST has incurred losses to the tune of GHC400 Million.
We, by this publication seek to correct the erroneous impressions created by the publication and
wish to set the record straight as follows:
1. Underlying Business of your company, BOST is PROFITABLE – The report of the GHC400
million losses made by BOST is not accurate. To measure the profitability and operational
efficiency of a Business one must determine whether the underlying operations (core business) of the company are profitable.
The Managing Director in his submission at SIGA was emphatic that the company achieved a
profit before tax of GHS9,844,673 versus an estimated GHC30million in year 2020 as against
a loss of GHS158,478,676 in 2019. The positive net profit before tax attained in 2020 implies
a massive turnaround of the operational fortunes of the company (Appendix 3). This was the
basis of the MDs assertion at the SIGA engagement buttressed by publications from media
houses like the Daily Graphic and GNA1. He was however quick to add that, unpaid tax
obligations over the five-year period to date, the reduction in the value investment in GOIL
and forex difference on dollar denominated loans MAY turn the profit before tax into a net
loss for the period.
This enhanced performance was driven by extensive operational efficiency initiatives
including, but not limited to massive repair works of our storage tanks, pipelines and marine
1 https://ghana-news.net2tvgh.com/bost-sets-aside-gh200-million-to-transform-petroleum-sector/assets, replacement of outmoded parts across the facilities of the company in the last two
years supported by improved marketing and customer service. In the past two years, our
income-earning assets has improved from 18% to 91%.
2. Net Loss after Tax – There were several events outside management’s control that impacted
the overall business negatively thus posting a loss for the year 2020 in the statement of
comprehensive income (Appendix 1).
Firstly, BOST as part of its drive towards operational excellence undertook a revaluation of
its assets in the 2020 financial year. This had become necessary as most of the assets still in
operation had been written down to near-zero levels whilst still useful in the operations of
the company. As required by the International Financial Reporting Standards, IFRS, when
assets are revalued, the increase in their values is taxed resulting in larger tax obligations.
The revaluation which was a deliberate decision to enhance the reporting of the company led
to a deferred tax obligation of GHC292,935,973 compared to the net loss of GHC291,017,758,
a difference of GHC1,918,215 (Appendix 1). The increase in the value of the revalued assets
also resulted in increased depreciation charges which further reduced the bottom-line or the
profit for the year. (Appendix 2 – 12d).
Secondly, BOST owns a 20% stake in GOIL. In any financial year, any loss in the market value
of shares of GOIL is computed and that reduces the income of BOST to arrive at its net profit
or loss for the year. In the year 2019 to 2020, our investment in GOIL saw a reduction of
GHS15,674,525 its market value of. (Appendix 2 – Note 15). Respectfully, this event is
external to BOST operations and therefore to gauge the performance of BOST management
and staff by this loss in investment will not be fair. This is the reason why we should rely on
the profit before tax rather than all these uncontrollable factors which have been factored in
to arrive at the net profit or loss for the year.
The recorded net losses for the years 2019 and 2020 per the income statement (Appendix 1)
attached were therefore GHS101,411,781 and GHS291,017,758.
3. Your Company, BOST has been turned around – Any comprehensive and objective analysis
of the audited statements for the past five years (Appendix 3 – 2016-2020 profit before tax
trend) will show a company on track to higher performance through enhanced efficiency and
we look forward to capitalizing on these modest improvements to make BOST an example of
a World-Class State-Owned Enterprise.
It remains uncontested that the debt to suppliers and related parties of $623 million has been
paid down to $39 million, the debts owed the local banks of about GHS273 million has been
fully cleared and our pipelines which were procured in 2011 and left to the mercy of the
weather in the United States under the AT & V contract have arrived safely on our shores and
we expect to complete the installation of the additional 12 inch pipeline between the Accra
Plains and Akosombo depots.
The cashflow position of the company is enhanced and the repair of the company’s
infrastructure continues despite the reduction in our BOST Margin.
In conclusion, we reiterate the fact that your company BOST is on its way to becoming a
PROFITABLE STATE-OWNED ENTERPRISE and nothing will derail the resolve of
management and staff to achieve this.
God Bless Our Homeland Ghana and make us GREAT and STRONG.
…END…
