RPL Pumped Up Earnings, Despite Revenue Leakage

• Despite a decline in revenues in the second quarter ending June (Q2 2025), Regency Petroleum Limited (RPL) recorded a 36.0% increase in earnings as the net effect of lower petroleum prices and volumes sold at its new location in Spanish Town benefited the company.
• The new location helped to drive the increase in volumes sold; however, despite the increase in the volume of 87 and 90 octane fuel sold during the quarter, revenues declined by 10.7%, due to the fall in petrol prices. The average prices for 87 and 90 octane fuel declined by 10.5% and 10.7%, respectively.
• While the price reduction negatively impacted revenues, it had a positive impact on margins as the cost of sales declined at a faster pace of 19.4% to $338.67Mn. Consequently, this resulted in an 853bps increase in gross margin to 21.3%. Falling ex-refinery prices for gasoline typically allow retailers like RPL to widen margins and improve profitability.
• However, the company saw a sharp increase in operating expenses. Total operating expenses were 39.6% higher at $46.12Mn relative to the prior period of $33.04Mn as the company opened its new Spanish Town Road service station in January. The new location has increased expenses like staff costs, security costs, and depreciation expenses. RPL also spent more on repairs and maintenance during the period related to various service stations and filing stations across the country.
• That said, it benefited from a $983,300 expected credit loss write-back as the company recovered funds owed from LPG customers.
• The company’s new truck stop in Crawford, St. Elizabeth, is currently being developed and has made significant progress since the announcement, as construction continues on the convenience store and other parts of the location.
• Operating under a dealer-owned, dealer-operated model, the truck stop will allow RPL to generate recurring revenue through fuel supply and franchising without bearing full operational costs, potentially boosting margins. The strategic expansion, coupled with a first-mover advantage in the truck stop segment, positions RPL to strengthen its market presence, enhance operational efficiency, and support long-term earnings growth. The company also hinted at a second service station project expected to break ground by year-end, reinforcing the company’s aggressive growth trajectory.
• RPL’s stock price has increased by 18.5% since the start of the calendar year. The stock closed Tuesday’s trading session at $3.91 and currently trades at a P/B of 9.9x above the Junior Market Distribution Sector Average of 3.8x.

 (Sources: JSE & NCBCM Research)