Fesco prepares to enter cooking gas market
Published:Friday | February 18, 2022 | 12:14 AM
Future Energy Source Company, which trades as Fesco, has set April 2023 as its target date to enter the liquefied petroleum gas, or LPG, market.
The company, which is in the business of fuel marketing and retailing, has also disclosed that it will be adding four to six gas stations to its network of 16 over the next year and a half, and will open the company-operated FYC Refill Water Store and its FYC Express Mart convenience store at its Beechwood Avenue service station as part of efforts to develop the service station into a one-stop-shop.
“You can look for us coming closer to you with new locations,” said Managing Director Jeremy Barnes, while addressing the Mayberry Investor Forum on Wednesday. Typically, gas stations take about three years from the planning to the opening date, and so we are at various stages of the process for each location,” said Barnes. “Within the next 15 months we are going to be in the LPG space and we will also be coming out with new products,” he added.
For the quarter ended December 2021, Fesco made a profit of J$73.6 million, more than tripling the $20 million of earnings in the comparative period of 2020. Revenues for the quarter also climbed 139 per cent to $3.6 billion.
Over nine months, the company recorded $170.8 million in profit, putting it on track to meet its profit forecast for year ending March 2022. Its projecting $263 million of profit for the year. By 2025, it expects to be close to achieving half-billion in earnings.
Its diversification into the supply of cooking gas into the commercial and residential markets, along with the buildout of its gas station network, are expected to be primary drivers for the company’s growth.
“The FYC Refill Water Store and its FYC Express Mart won’t bring us the big bucks, but it will bring incremental earnings and, importantly, help us to create a destination service station which essentially brings in more customers,” Barnes said.
LPG data up to 2019 valued valued the market at around $1.7 billion to $2.2 billion. In terms of volumes, the market was estimated then at 15.7 million litres per month, reflecting a 9.5 per cent compounded annual growth rate since 2015 when volumes amounted to a monthly 10.9 million litres.
Turbulence from the COVID-19 pandemic has reportedly pushed consumption down 10 per cent, relative to 2019, as orders from the restaurants and hotel industry declined. Nevertheless, the market showed resilience to the impact of the COVID-19, with the preparation of more meals at home.
“Moving into the LPG space is very capital intensive and equipment intensive, we will start making investments and deploying capital to acquire assets. Going forward we will be making investments in cylinders,” Barnes said.
Updated numbers on the company’s spend for the buildout of the LPG business was not disclosed. It was lumped into the $750 million to $850 million that Fesco said in its market prospectus that it would be investing in the addition of service stations and cooking gas/LPG assets. The gas marketer went public and listed on the junior market of the Jamaica Stock Exchange last April.