1

Unveiling Afriquia Gaz: A Comprehensive Analysis of Financial and Operational

Performance

Safaa Srondy, Ibtihal Boujeddaine

FIN 3307 Financial Investment and Analysis

Supervised by: Dr. Imad Jabbouri, PhD, CFA

21st February 2024

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Table of contents

I. Research and Analysis:..........................................................................................................5

1. Company analysis...................................................................................................................5
a) Background.....................................................................................................................................5
b) Mission and values..........................................................................................................................5
a) Key indicators of Afriquia Gaz......................................................................................................6
 Overview of the company’s performance in 2023:....................................................................................10

2. The industry:.........................................................................................................................10
a) Main indicators of the industry...................................................................................................10
Petroleum bill:.....................................................................................................................................................10
Indicators 2021:...................................................................................................................................................11

b) Key players and market share:....................................................................................................11

VIVO Energy:.....................................................................................................................................................11
TotalEnergies Marketing Maroc:.........................................................................................................................12
PETROM:............................................................................................................................................................12

c) Major regions of production and consumption:........................................................................13

 Consumption:.............................................................................................................................................13
 Production:.................................................................................................................................................13

3. The economic environment:.................................................................................................14

a) Currency exchange rates..............................................................................................................14
b) Entry requirements.......................................................................................................................14
c) Barriers to entry:..........................................................................................................................16
d) ESG performance:........................................................................................................................16
4. Porter’s Five Forces.............................................................................................................17
Treat of New Entrants:..........................................................................................................................17
Bargaining Power of Buyers:................................................................................................................17
Bargaining Power of Suppliers:...........................................................................................................17
Threat of Substitutes:............................................................................................................................17
Competitive Rivalry:.............................................................................................................................18
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5. SWOT Analysis for Afriquia Gaz:.......................................................................................18

a) Strength..........................................................................................................................................18
Strong Brand Reputation:....................................................................................................................................18
Innovative Products/Services:.............................................................................................................................19
Commitment to Sustainable Development:.........................................................................................................19

b) Weaknesses:...................................................................................................................................19
Tied to Akwa Group:...........................................................................................................................................20
Limited market presence in certain regions:.......................................................................................................20

C. Opportunities....................................................................................................................................21
Innovation and Product development:.................................................................................................................21
Diversification in Energy Solutions:...................................................................................................................21

D. Threats...............................................................................................................................................22
Economic and Regulatory Risks:........................................................................................................................22
Competitive Landscape:......................................................................................................................................22
Environmental Concerns:....................................................................................................................................22

6. The Afriquia Gaz’s competitive position and strategic outlook..........................................23

a) Competitive Position.....................................................................................................................23
Market Share:......................................................................................................................................................23
Comparison with key competitors:.....................................................................................................................23

b) Strategic Outlook:.........................................................................................................................24
Assessment of Current Strategic Initiatives:.......................................................................................................24
Identification of Potential Areas for Improvement or Expansion:......................................................................24

7. Recent Events & News and Its Impact on Afriquia Gaz.....................................................25

"Afriquia Gaz voit son bénéfice net baisser de 6,9% en 2023"..........................................................................25
"Gaz au Maroc: Encore plus de concret"............................................................................................................25
Dans le « dossier des hydrocarbures » au Maroc, tous les ingrédients d’une affaire explosive réunis...............26

II. Ratios analysis......................................................................................................................27

A. Data.......................................................................................................................................27
1. Income statement..........................................................................................................................27
2. Balance sheet.................................................................................................................................29
3. Cash flow statements....................................................................................................................33
B. Ratio calculations:................................................................................................................36
Activity ratios......................................................................................................................................................38
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Liquidity ratios....................................................................................................................................................39
Solvency ratios....................................................................................................................................................40
Profitability ratios................................................................................................................................................40

III. Financial Analysis................................................................................................................41

 Overview about 2019....................................................................................................................41
 Overview about 2020....................................................................................................................42
1. Income Statement Analysis:.........................................................................................................43
a. 2019-2020..................................................................................................................................................43
b. 2020-2021:.................................................................................................................................................44
c. 2021-2023:.................................................................................................................................................46

2. Balance Sheet analysis:.................................................................................................................47

a. 2019-2020..................................................................................................................................................47
b. 2020-2021..................................................................................................................................................47
c. 2021 to 2023..............................................................................................................................................48

3. Cash flow statement analysis.......................................................................................................49

a. Operating Activities:..................................................................................................................................49

a. Ratio Analysis of 2019- 2021........................................................................................................53

Activity Ratios:...................................................................................................................................................53
Liquidity Ratios:..................................................................................................................................................54
Solvency Ratios:..................................................................................................................................................55
Profitability ratios:...............................................................................................................................................56

b. Ratio Analysis of 2021-2023.........................................................................................................57

Activity ratios......................................................................................................................................................57
Liquidity ratios....................................................................................................................................................59
Solvency Ratios:..................................................................................................................................................60
Profitability ratios:...............................................................................................................................................62
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I. Research and Analysis:

1. Company analysis

a) Background

Afriquia Gaz SA a subsidiary of Akwa Group is a Morocco-based company, leader in the

distribution of liquefied petroleum gas, butane, and propane, as well as the refining and

marketing of the liquified petroleum gas.

 It trades under five commercial brands: Ariquia Gaz, Tissir Gaz, Ultrogaz, National Gaz

and Campingaz.

 It operates through a network of various subsidiaries and affiliate companies: Sodipit,

National Gaz, Dragon Gaz, Gazafric, Amnium Stockage, Proactis, Salam Gaz and

Stogaz.

b) Mission and values

Afriquia Gaz’s mission is to keep its pace with the Moroccan social and economic

development.

For the values, it offers high performance and innovative energy solutions for both

professional and domestic needs. Its policy is based on excellence, committed for customer

satisfaction, as well as its sustainable development in a genuine societal project with an approach

to quality, hygiene, and the environment.

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a) Key indicators of Afriquia Gaz

 2023 2022 2021 2020

Earnings Quality Score 55 38 92 6

7
31-Dec- 31-Dec- 31-Dec- 31-Dec-
Period End Date 2023 2022 2021 2020

Revenue 8.257.014 9.510.065 7.132.280 5.716.070

Net Sales 8.257.014 9.510.065 7.132.280 5.716.070

Total Revenue 8.257.014 9.510.065 7.132.280 5.716.070

Cost of Revenue, Total 6.205.255 7.656.209 5.483.014 4.001.213

Cost of Revenue 6.205.255 7.656.209 5.483.014 4.001.213

Gross Profit 2.051.759 1.853.856 1.649.266 1.714.857

Selling/General/Admin. Expenses,
Total 212.610 190.815 194.650 195.191

Labor & Related Expense 212.610 190.815 194.650 195.191

Depreciation/Amortization 375.032 370.847 351.660 333.979

Depreciation 373.884 370.847 351.660 333.979

Amortization of Intangibles 1.148 -- -- --

Other Operating Expenses, Total 649.117 410.270 421.519 692.348

Other, Net 649.117 410.270 421.519 692.348

Total Operating Expense 7.442.014 8.628.141 6.450.843 5.222.731

Operating Income 815.000 881.924 681.437 493.339

Interest Expense, Net Non-

Operating (149.289) (106.321) (73.452) (59.042)

Interest Expense - Non-

Operating (149.289) (106.321) (73.452) (59.042)
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 For the fiscal year ended 31 December 2023, Afriquia Gaz SA revenues decreased by 13% to

MAD8.26B.

 Net income decreased by 7% to MAD481.5M. Revenues reflect a decrease in demand for the

Company's products and services due to unfavorable market conditions.

 Net income also reflects Other Operating Charges/Income increase of 54% to MAD680.2M

(expense), Interest Expenses increase of 40% to MAD149.3M (expense).

Industry

Liquidity Median 2023 2022 2021 2020

Quick Ratio 1.12 0,68 0,70 0,84 0,79

Current Ratio 1.41 0,79 0,85 0,90 0,87

Times Interest Earned 14.1 5,5 8,3 9,3 8,4

(81,8 (60,1 (74,3 (101,0

Cash Cycle (Days) 23.6 ) ) ) )

 A quick ratio of 1.12 in 2023 indicates that the corporation had $1.12 of liquid assets to cover

each dollar of current liabilities. The increase from 2022 (0.68) to 2023 (0.79) represents an

improvement in the company's short-term liquidity situation.

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 With a current ratio of 1.41 in 2023, the company had $1.41 in current assets for every dollar of

current liabilities. Again, the increase from the previous year (0.79 in 2022) suggests an

enhancement in liquidity.

 In 2023, the company's cash cycle improved significantly to (81.8) days, meaning it was able to

convert its resources into cash more efficiently compared to previous years.

 Overview of the company’s performance in 2023:

- Even though Afriquia Gaz’s increase 2.2% in its sales achieving 1209308 tons, It has

been hit by a deficit of 7% in 2023, this is mainly because of the decrease of the selling

price that was followed by a decrease in consolidated sales ok 13.2%.

- The operating income has also decreased by 7.6% due to the increase of external costs

and operating costs.

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2. The industry:

a) Main indicators of the industry

Petroleum bill:

 The largest imports are “petrole et produits petroliers” which are oil and petroleum

products, it was at its highest in 2012 with 94.6 billion MAD and reached 63.6 in 2021.

 Imports of natural gas are generatively low.

 Morocco exports oil and petroleum products, the amount is significantly lower than the

imports. In 2021 the exportations reached 2,15, resulting in a trade deficit of 61.45 in this

specific sector.
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Indicators 2021:

b) Key players and market share:

VIVO Energy: Vivo Energy is a leading pan-African distributor and retailer of high-quality

fuels and lubricants, operating under the renowned brands Shell and Engen. With a presence

dating back to 1922 in Morocco, Vivo Energy has established itself as a key player in the market.

Beyond its core offerings of fuels and lubricants, Vivo Energy is expanding its retail footprint to

include non-fuel products and is dedicated to developing innovative energy solutions to enhance

sustainability across the continent. With a diverse customer base of 1000 direct clients across

various sectors including B2B, Marine, Aviation, and GPL, Vivo Energy maintains a fleet of 180

trucks to ensure efficient distribution.

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TotalEnergies Marketing Maroc: Total Maroc is a prominent energy company in Morocco, it

operates across various sectors, including petroleum products, renewable energy, and lubricants.

Known for its innovation, sustainability efforts, and commitment to customer satisfaction, Total

Maroc plays a vital role in Morocco's economy and social development.

PETROM: Petrom's journey began in 1945 when the American group Esso established its

Moroccan subsidiary. Following nationalization in 1974, it became Petrom under SNPP's

ownership. In 1993, amid privatization, Petrom joined the Holsatek Group, marking a shift

towards innovation and expansion. Rapid growth ensued, with Petrom emerging as a market

leader in black products and chemicals. Modernization efforts, including the adoption of SAP in

2005 and the launch of the Petrom Portal in 2011, propelled the company forward. In 2013,

Petrom introduced its own product line, XPRO. The launch of the Petrom 2020 project in 2017

underscored the company's commitment to innovation and stakeholder satisfaction, ensuring a

bright future ahead.

c) Major regions of production and consumption:

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 Consumption:

Petroleum Products: The consumption of petroleum products is reported as 11.2426 million tons.

Natural Gas: The consumption of natural gas is reported as 771.9 million standard cubic meters

(MNm3).

 Production:

Condensate: The production of condensate is reported as 3.264 tons. Condensate is a light liquid

hydrocarbon produced in association with natural gas production.

Natural Gas: The production of natural gas is reported as 109.95 million standard cubic meters

(MNm3). According to the U. S’s Energy Information Administration, reserves of shale gas in

Morocco is estimated to be at 20 trillion cubic feet (566 billion cubic meters), with 17 trillion

cubic feet located in the Tindouf Basin (including 8 trillion cubic feet in the Western Sahara) and

3 trillion cubic feet in the Tadla Basin.

3. The economic environment:

a) Currency exchange rates

Morocco is a major importer of oil and gas; it relies heavily on its imports to meet its

domestic demand. Oil’s price is in USD, meaning it will cost more for businesses and consumers

in Morocco. Currently the exchange rate is 10.0438 MAD per USD, let’s give an example:

o Suppose Morocco imports 50,000 barrels of oil per day at a price of $70 per barrel. The cost

in MAD would be:

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Cost in MAD = 50,000 barrels/day * $70/barrel * 10.0438 MAD/USD =

352,026,000 MAD per day

o If the exchange rate weakens to, for instance, 12 MAD per USD, the cost in MAD would

become:

Cost in MAD = 50,000 barrels/day * $70/barrel * 12 MAD/USD =

420,000,000 MAD per day

o So, a weakening of the MAD against the USD increases the daily import cost by 67,974,000

MAD.

b) Entry requirements

Under the Hydrocarbon Code, as provided by Gide, a prominent international law firm

specializing in business law. Morocco allows both local and foreign entities to undertake

exploration and production activities in the country.

Operators are required to demonstrate their financial capability as well as technical competence

to carry out exploration work and fulfill a minimum program of works as well as provide a

performance bond (Gide, 2024).

No Obligation to Register: There is no legal requirement that must be followed under the

Hydrocarbon Code for registration of a branch or company in Morocco for oil and gas

operations. Nevertheless, this obligation may arise if one sets up an office here to attract potential

investors or partners from within Morocco.

Authorization of Foreign Investments: Moroccan citizens have equal rights with those from
 15

other countries regarding investing, according to Moroccan legislation. Nonetheless, ONHYM

(National Office of Hydrocarbons and Mines), on behalf of the Kingdom of Morocco, will hold a

maximum interest of 25% in any petroleum agreement or exploitation concession while actual

level shall be settled at signing stage.

The primary fiscal/legal model for granting oil and gas exploration/production rights in

Morocco consists of the following stages:

Reconnaissance License: Initial period not exceeding one year extendable thereafter by similar

periods.

Exploration Permit: Maximum period of eight years

c) Barriers to entry:

The Oil and Gas sector is regulated by the Hydrocarbon Code (Law no. 21-90 amended

and completed by Law no. 27-99)

Exploration and exploitation barriers: under Decree No 2-14-541 dated 8 August 2014

Regulatory processes and requirements for obtaining permits and concessions may pose

challenges to exploration and production activities, as well as a petroleum agreement with the

Moroccan state represented by ONHYM, under which the state holds a maximum 25%

participating interest in any subsequent exploration permits and concessions.

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Limited infrastructure: The infrastructure for oil and gas transportation and processing

may be insufficient to support increased production.

Environmental issues: There may be environmental risks associated with oil and gas

exploration and production activities, necessitating adherence to strict regulations for

environmental protection.

d) ESG performance:

Afriquia Gaz SA is a Natural Gas Utilities company headquartered in Morocco. For the fiscal

year ended in December 2022, [Link] received an ESG score of 25.15 (Grade: C-). Over the

last 5 years, the company has an average ESG score of 19.56, and a median ESG score of 25.15.

Refinitiv ESG score is calculated as a sum of weighted individual pillar scores. For [Link],

Environmental, Social, and Governance pillars are weighted 36.13%, 38.66%, and 25.21%

respectively in ESG score weighting, consistent with companies within the Natural Gas Utilities

industry groups. [Link]’s controversy score of 100.00 (Grade: A+) is calculated based on total

count of controversies related to the company, as collected by Refinitiv ESG team, and

normalized based on company’s market capitalization. Discounted by its controversies, [Link]

received an ESG Combined score of 25.15 (Grade: C-) for the year.

4. Porter’s Five Forces

Treat of New Entrants:
The treat of new entrants can be seen
as challenging due to the number of
documentations that has to be
Bargaining Power of Buyers: provided, as well as the requirements
Buyers: include domestic and professional. imposed by the Hydrocarbon Code
Availability of Substitutes: There might be processes and requirements, along
some availability of substitutes in the form with the need for permits and
 17

Porter’s
five forces
Bargaining Power of Suppliers:
Saudi Arabia: 33.8 billion dirhams, representing Threat of Substitutes:
around 44% of total imports. There are energy sources like solar,
Spain: for importing gasoline and industrial fuel. wind, and nuclear power.
United States: 71.7% of butane imports -It requires significant investment,
Mon several countries for its energy imports. While infrastructure, and technology. But the
certain suppliers, such as Saudi Arabia for industrial long-term operational costs are lower.
gas and fuels, hold a significant share of Morocco's The threat of substitutes is significant.
imports, the
Competitive diversity of sources, including Spain,
Rivalry:
the companies
Several United States,have
and others, helps mitigate
been accused the
of anti-competitive practices, including price fixing.
bargaining power of suppliers.
The competition between companies is low, which can cause many challenges for the hydrocarbon
sector in Morocco.
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5. SWOT Analysis for Afriquia Gaz:

a) Strength

Afriquia Gaz has some key internal strengths contributing positively to its overall

performance. Afriquia Gaz holds a very important position in the Moroccan Gas market because

of its diverse range of gas-related products such as heating, cooking, and electricity solutions,

which allows it to effectively address a variety of consumer needs market.

Strong Brand Reputation:

A standout strength for Afriquia Gaz is its strong brand reputation. The company is

recognized as a socially responsible entity, actively prioritizing the health and well-being of its

employees. With a rich history, a commitment to product quality, and the trust it has earned from

consumers, Afriquia Gaz not only leads the national market but also enjoys a positive reputation.

Innovative Products/Services:

Afriquia Gaz distinguishes itself through a proactive approach to innovation in its product

lineup. The launch of groundbreaking products like the "New Generation Cylinder" with the user-

friendly "Clic-on" connection system reflects the company's dedication to staying ahead in

technological advancements. This commitment not only enhances user convenience and safety

but also positions Afriquia Gaz as a forward-thinking industry leader shaping the landscape of

liquefied petroleum gas.

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Commitment to Sustainable Development:

A notable aspect of Afriquia Gaz is its strong commitment to sustainable development.

Integrating considerations for quality, hygiene, and the environment into its operations, the

company holds Triple QHSE certifications. Emphasizing societal responsibility, Afriquia Gaz

showcases dedication to maintaining high standards in quality, health, safety, and environmental

practices. This commitment resonates with broader sustainability goals and positions Afriquia

Gaz as a socially responsible player in the industry.

b) Weaknesses:

Afriquia Gaz faces certain internal factors that pose challenges to its overall performance.

Tied to Akwa Group:

Afriquia Gaz's reliance on Akwa Group, its parent company, is a potential weak spot.

Since it's a subsidiary, with Akwa holding a substantial 30% ownership stake as of July 21, 2022.

This delineates a notable degree of control and influence exerted by Akwa Group over Afriquia

Gaz. Financially, this interdependence is pronounced, as Akwa Group's decisions, particularly in

matters like capital increases and dividend allocations, hold direct implications for Afriquia Gaz.

To sum up, the success of Afriquia Gaz is closely linked to what Akwa Group does. If the parent

company faces challenges or makes strategic decisions that don't align, it could impact Afriquia

Gaz's performance badly.

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Limited market presence in certain regions:

Afriquia Gaz has an extensive network of over 4000 selling points, such as gas stations

and retail outlets, across Morocco. Afriquia Gaz has a filling center in different regions in

Morocco including Marrakech: One of the largest filling centers with a production capacity of

130,000 tons per year. Mohammedia (Established in 1996): Filling capacities of 104,000 tons per

year for butane and 2,500 tons per year for propane. However, Afriquia Gaz faces a challenge

with its limited reach beyond Morocco. The company hasn't shown any signs of growing beyond

its home turf, which might limit its chances to expand and reach new markets. and missing the

advantages of being known internationally

C. Opportunities

Innovation and Product development:

Afriquia Gaz has the potential to capitalize on innovation and product development

opportunities. The recent launch of the "New Generation Cylinder" with the user-friendly "Clic-

on" connection system demonstrates the company's commitment to technological advancements.

For example, incorporating smart technologies in monitoring gas usage, introducing energy-

efficient appliances, or developing environmentally friendly packaging are avenues for further

innovation. Evidence of success in this area could be measured by increased customer

satisfaction, market share growth, or recognition in industry awards.

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Diversification in Energy Solutions:

Afriquia Gaz has an opportunity for growth by diversifying its energy solutions beyond

liquefied petroleum gas in line with global energy trends. Exploring renewable sources like solar

and wind power, and introducing hybrid energy solutions, could tap into new markets and

enhance sustainability. Success indicators may include pilot project outcomes, increased revenue

from diversified sources, positive customer feedback on eco-friendly initiatives, and collaborative

efforts with research institutions or industry partners in renewable energy.

D. Threats

Economic and Regulatory Risks:

Afriquia Gaz faces economic and regulatory risks, exemplified by factors such as a

fluctuating exchange rate. The volatility in the Moroccan Dirham against the US Dollar impacts

import costs for oil and gas, potentially increasing expenses and affecting profitability.

Additionally, economic challenges, as witnessed in the 6.9% revenue decline in 2023, combined

with inflation and unemployment in Morocco, may decrease the consumer demand for gas.

Competitive Landscape:

Afriquia Gaz operates within a dynamic market alongside notable competitors such as

TotalEnergies Marketing Maroc and VIVO Energy. The company must demonstrate strategic

agility to retain existing customers and attract new ones. Moreover, navigating pricing dynamics
 22

in concert with competitors, including TotalEnergies Marketing Maroc, is crucial for Afriquia

Gaz to uphold its market position. Vigilance, adaptability, and continuous innovation are essential

in this fiercely competitive environment.

Environmental Concerns:

People care more about the environment now, and this could be a problem for Afriquia

Gaz. They have to think about being eco-friendly and maybe change things to keep up with what

people want. It's important to stay ahead of the rules and do things in a way that's good for the

Earth.

6. The Afriquia Gaz’s competitive position and strategic outlook

a) Competitive Position

Market Share:

Afriquia Gaz, holding a commanding 24.3% market share in Moroccan liquefied petroleum gas

distribution, attributes its success to a robust infrastructure and a diverse product portfolio. A

prime example of the company's commitment to innovation is the New Generation Cylinder,

featuring a user-friendly "Clic-on" connection system. This groundbreaking product not only

enhances safety standards but also exemplifies Afriquia Gaz's proactive approach in meeting

evolving consumer demands. These strategic initiatives solidify Afriquia Gaz's dynamic and

competitive position in the Moroccan market.

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Comparison with key competitors:

Afriquia Gaz outshines its competitors through an unparalleled storage network, exemplified by

the Terminal de Jorf Lasfar's impressive capacities of 4,000 T for propane and 20,000 T for

butane. In Mohammedia, Stogaz, with a 2,000 T capacity for GPL, predominantly propane, and a

50% ownership by Akwa Group, solidifies Afriquia Gaz's competitive advantage. Gaz Afric in

Agadir, equally owned, contributes significantly with a 7,500 T storage capacity. This extensive

infrastructure, coupled with strategic partnerships and acquisitions, sets Afriquia Gaz apart,

boasting the largest LPG storage capacity nationally and positioning the company as an industry

leader with a formidable competitive edge over key competitors.

b) Strategic Outlook:

Assessment of Current Strategic Initiatives:

Afriquia Gaz has demonstrated a commitment to innovation, evident in the introduction of the

New Generation Cylinder with the "Clic-on" connection. This initiative enhances user

convenience and safety. Additionally, the company's emphasis on sustainable development, as

reflected in its certifications and societal projects, aligns with contemporary environmental

concerns. Afriquia Gaz's participation in industry events like the Salon Marocotel and its rewards

program for IGAZ users showcase a strategic approach to brand visibility and customer

engagement.
 24

Identification of Potential Areas for Improvement or Expansion:

Diversification: Afriquia Gaz can explore diversification into renewable energy solutions or

explore partnerships in emerging technologies to stay at the forefront of industry trends. For

example, partnering with a solar energy provider, such as Atlas Solaire, to offer hybrid solutions,

combining traditional LPG with solar-powered water heating systems for residential and

commercial clients.

Digital Integration: Enhancing digital platforms for customer interactions and services can

improve efficiency and customer satisfaction.

International Expansion: Exploring opportunities for international expansion can provide new

markets for Afriquia Gaz, mitigating dependence on local economic conditions.

7. Recent Events & News and Its Impact on Afriquia Gaz

"Afriquia Gaz voit son bénéfice net baisser de 6,9% en 2023"

In 2023, Afriquia Gaz experienced a 6.9% decrease in profit due to reduced prices,

impacting the company's financial stability and potential for future investments. Despite this, the

company managed to achieve a 2.2% increase in gas sales, exceeding a million tons. The article

highlights Afriquia Gaz's resilience in the face of challenges, emphasizing its commitment to

growth and exploration in the gas market. The strategic moves by the parent company, Akwa
 25

Group, further indicate a proactive approach to navigating industry changes and maintaining

competitiveness.

 Impact on Afriquia Gaz:

The decline in profit directly affects Afriquia Gaz's financial standing, potentially limiting

its capacity to invest in future projects. However, the increase in gas sales and strategic moves by

Akwa Group suggest a determined effort to adapt to industry dynamics and continue growing.

"Gaz au Maroc: Encore plus de concret"

The gas exploration developments in Morocco, as outlined in the article, have significant

implications for Afriquia Gaz. Collaborations with companies like Predator Oil & Gas, especially

regarding potential compressed natural gas (CNG) sales, could influence Afriquia Gaz's supply

chain and prompt strategic adjustments. The increased competition from various exploration

projects, notably Chariot's "Anchois" gas development, may alter market dynamics, requiring

Afriquia Gaz to adapt its strategies accordingly. Improved infrastructure, such as SDX Energy's

successful well testing, could indirectly benefit Afriquia Gaz's operational efficiency.

 Impact on Afriquia Gaz:

The gas exploration activities and collaborations present opportunities and challenges for

Afriquia Gaz. While potential CNG sales collaborations offer avenues for growth, increased
 26

competition and market dynamics necessitate strategic adjustments. Improved infrastructure

aligns with operational efficiency improvements for Afriquia Gaz.

Dans le « dossier des hydrocarbures » au Maroc, tous les ingrédients d’une affaire explosive

réunis

The third article highlights the settlement reached by the Competition Council in

Morocco, impacting Afriquia Gaz and other oil companies, including Total. The substantial fine

of 1.8 billion dirhams on the companies, deemed "light" by some observers, raises concerns about

its impact on profitability and reputation. The mandated commitments to enhance market

competition and implement a compliance program will likely require operational adjustments for

Afriquia Gaz. Maintaining positive relations with government authorities and investors becomes

crucial, emphasizing the need for the company to navigate these challenges effectively.

 Impact on Afriquia Gaz:

The Competition Council settlement poses multifaceted effects, including potential

financial strains, reputational damage, and the need for operational changes for Afriquia Gaz to

comply with regulations. Navigating these challenges while upholding fair competition and

regulatory compliance is crucial for the company's sustained success.

 27

II. Ratios analysis

A. Data

1. Income statement

Afriquia Gaz SA | Income Statement

Income Statement

Annual Standardized in Thousands of Moroccan Dirhams

2019 2020 2021 2022 2023

Earnings Quality Score 44 6 92 38 55

31-Dec- 31-Dec- 31-Dec- 31-Dec- 31-Dec-

Period End Date
2019 2020 2021 2022 2023

Revenue 6,347,614 5,716,070 7,132,280 9,510,065 8,257,014

Net Sales 6,347,614 5,716,070 7,132,280 9,510,065 8,257,014

Total Revenue 6,347,614 5,716,070 7,132,280 9,510,065 8,257,014

Cost of Revenue, Total 4,573,795 4,001,213 5,483,014 7,656,209 6,205,255

Cost of Revenue 4,573,795 4,001,213 5,483,014 7,656,209 6,205,255

Gross Profit 1,773,819 1,714,857 1,649,266 1,853,856 2,051,759

Selling/General/Admin. Expenses,
168,929 195,191 194,650 190,815 212,610
Total

Labor & Related Expense 168,929 195,191 194,650 190,815 212,610

 28

Depreciation/Amortization 305,083 333,979 351,660 370,847 375,032

Depreciation 305,083 333,979 351,660 370,847 373,884

Amortization of Intangibles -- -- -- -- 1,148

Other Operating Expenses, Total 321,491 692,348 421,519 410,270 649,117

Other, Net 321,491 692,348 421,519 410,270 649,117

Total Operating Expense 5,369,298 5,222,731 6,450,843 8,628,141 7,442,014

Operating Income 978,316 493,339 681,437 881,924 815,000

Interest Expense, Net Non-Operating (54,430) (59,042) (73,452) (106,321) (149,289)

Interest Expense - Non-Operating (54,430) (59,042) (73,452) (106,321) (149,289)

Interest/Invest Income - Non-

96,091 106,673 114,136 69,156 84,399
Operating

Interest Income - Non-Operating 17,151 37,112 27,545 10,538 12,575

Investment Income - Non-

78,940 69,561 86,591 58,618 71,824
Operating

Interest Inc. (Exp.), Net-Non-Op.,

41,661 47,631 40,684 (37,165) (64,890)
Total

Other, Net 4,180 4,288 21,436 (31,593) (5,523)

Other Non-Operating Income

4,180 4,288 21,436 (31,593) (5,523)
(Expense)

Net Income Before Taxes 1,024,157 545,258 743,557 813,166 744,587

Provision for Income Taxes 324,957 183,020 239,693 296,279 263,120

Net Income After Taxes 699,200 362,238 503,864 516,887 481,467

Net Income Before Extra. Items 699,200 362,238 503,864 516,887 481,467
 29

Net Income 699,200 362,238 503,864 516,887 481,467

2. Balance sheet

Afriquia Gaz SA | Balance Sheet

Balance Sheet

Annual Standardized in Thousands of Moroccan Dirhams

2019 2020 2021 2022 2023

Earnings Quality Score 44 6 92 38 55

31-Dec- 31-Dec- 31-Dec- 31-Dec- 31-Dec-

Period End Date
2019 2020 2021 2022 2023
Assets (MAD Thousands)

Cash and Short Term Investments 1,256,851 353,953 815,769 579,079 693,331

Cash & Equivalents 1,256,851 353,953 815,769 579,079 693,331

Accounts Receivable -, Net 623,772 506,350 744,456 723,063 706,069

Accounts Receivable - Trade,

623,772 506,350 744,456 723,063 764,436
Gross

Provision for Doubtful Accounts -- -- -- -- (58,367)

Total Receivables, Net 1,967,061 1,963,063 3,675,965 3,309,867 2,203,664

Notes Receivable - Short Term -- -- -- -- 91

Receivables - Other 1,343,289 1,456,713 2,931,509 2,586,804 1,497,504

 30

Total Inventory 501,273 227,148 339,028 806,382 450,286

Inventories - Other 501,273 227,148 339,028 806,382 450,286

Other Current Assets, Total -- 1 -- -- 5,400

Other Current Assets -- 1 -- -- 5,400

Total Current Assets 3,725,185 2,544,165 4,830,762 4,695,328 3,352,681

Property/Plant/Equipment, Total -
-- -- -- -- 8,907,991
Gross

Buildings - Gross -- -- -- -- 1,038,750

Land/Improvements - Gross -- -- -- -- 161,698

Machinery/Equipment - Gross -- -- -- -- 6,713,230

Other Property/Plant/Equipment -
-- -- -- -- 994,313
Gross

Property/Plant/Equipment, Total -
3,473,672 3,589,893 3,731,786 3,870,869 3,993,866
Net

Accumulated Depreciation, Total -- -- -- -- (4,914,125)

Goodwill, Net 625,289 625,289 625,289 625,289 625,289

Intangibles, Net 5,244 5,159 3,448 2,967 2,329

Long Term Investments 285,576 313,650 411,118 438,321 430,638

LT Investment - Affiliate
263,529 291,589 345,849 389,638 387,973
Companies

LT Investments - Other 22,047 22,061 65,269 48,683 42,665

Other Long Term Assets, Total 115,040 203,855 266,999 377,847 413,639

Defered Income Tax - Long Term 115,038 203,830 266,998 274,300 284,038
 31

Asset

Other Long Term Assets 2 25 1 103,547 129,601

Total Assets 8,230,006 7,282,011 9,869,402 10,010,621 8,818,442

Liabilities (MAD Thousands)

Accounts Payable 3,324,202 2,364,065 4,763,881 4,518,078 3,656,373

Notes Payable/Short Term Debt 29,501 144,524 9,689 443,856 33,330

Current Port. of LT Debt/Capital

111,685 120,797 101,514 80,797 113,874
Leases

Other Current liabilities, Total 272,742 307,235 484,782 501,412 444,570

Income Taxes Payable 41,996 308 21,606 1,050 1,545

Other Payables 230,746 306,926 463,176 500,362 443,025

Other Current Liabilities -- 1 -- -- --

Total Current Liabilities 3,738,130 2,936,621 5,359,866 5,544,143 4,248,147

Total Long Term Debt 882,192 791,897 857,045 786,758 893,658

Long Term Debt 882,192 791,897 857,045 786,758 893,658

Total Debt 1,023,378 1,057,218 968,248 1,311,411 1,040,862

Deferred Income Tax 28,660 29,521 33,899 31,749 15,582

Deferred Income Tax - LT

28,660 29,521 33,899 31,749 15,582
Liability

Minority Interest 3 3 3 3 3

Other Liabilities, Total 639,305 649,706 670,151 676,260 689,128

 32

Other Long Term Liabilities 639,305 649,706 670,151 676,260 689,128

Total Liabilities 5,288,290 4,407,748 6,920,964 7,038,913 5,846,518

Shareholders Equity (MAD

Thousands)

Common Stock, Total 343,750 343,750 343,750 343,750 343,750

Common Stock 343,750 343,750 343,750 343,750 343,750

Additional Paid-In Capital 842,674 842,674 842,674 842,674 842,674

Retained Earnings (Accumulated

1,755,292 1,687,838 1,762,014 1,785,284 1,785,500
Deficit)

Other Equity, Total -- 1 -- -- --

Other Equity -- 1 -- -- --

Total Equity 2,941,716 2,874,263 2,948,438 2,971,708 2,971,924

Total Liabilities & Shareholders'

8,230,006 7,282,011 9,869,402 10,010,621 8,818,442
Equity

3. Cash flow statements.

Afriquia Gaz SA | Cash Flow

Cash Flow

Annual Standardized in Thousands of Moroccan Dirhams

 33

2015 2016 2017 2018 2023

Earnings Quality Score 71 24 97 96 55

31-Dec- 31-Dec- 31-Dec- 31-Dec- 31-Dec-

Period End Date
2015 2016 2017 2018 2023

Cash Flow-Operating Activities (MAD

Thousands)

Net Income/Starting Line 420,617 478,702 573,579 655,633 481,467

Depreciation/Depletion 211,303 233,639 292,793 283,461 375,032

Depreciation 211,303 233,639 292,793 283,461 375,032

Non-Cash Items 55,300 (61,051) (105,926) (37,306) (88,615)

Unusual Items -- -- -- (1,092) --

Equity in Net Earnings (Loss) 57,558 (28,036) (33,829) 1,317 (24,824)

Other Non-Cash Items (2,258) (33,015) (72,097) (37,531) (63,791)

Changes in Working Capital 352,870 (309,396) 244,511 197,476 716,873

Other Assets & Liabilities, Net 352,870 (309,396) 244,511 197,476 716,874

Other Operating Cash Flow 0 -- -- -- (1)

Cash from Operating Activities 1,040,090 341,894 1,004,957 1,099,264 1,484,757

 34

Cash Flow-Investing Activities (MAD

Thousands)

Capital Expenditures (277,542) (433,436) (300,913) (478,330) (457,666)

Purchase of Fixed Assets (277,542) (433,436) (300,913) (473,231) (457,154)

Purchase/Acquisition of Intangibles -- -- -- (5,099) (512)

Other Investing Cash Flow Items, Total 0 (1,376) 62,163 1,237 (8,012)

Sale of Fixed Assets -- -- 20,000 1,237 --

Purchase of Investments 0 0 0 0 (8,721)

Other Investing Cash Flow -- (1,376) 42,163 0 709

Cash from Investing Activities (277,542) (434,812) (238,750) (477,093) (465,678)

Cash Flow-Financing Activities (MAD

Thousands)

Financing Cash Flow Items 9,627 13,542 49,782 (135,141) (112,161)

Other Financing Cash Flow 9,627 13,542 49,782 (135,141) (112,161)

Total Cash Dividends Paid (360,938) (360,938) (360,938) (429,688) (481,250)

Cash Dividends Paid - Common (360,938) (360,938) (360,938) (429,688) (481,250)

Issuance (Retirement) of Debt, Net (86,599) (95,491) (83,781) (12,143) 99,111

Long Term Debt Issued 600,000 0 0 55,304 195,368

Long Term Debt Reduction (686,599) (95,491) (83,781) (67,447) (96,257)

 35

Long Term Debt, Net (86,599) (95,491) (83,781) (12,143) 99,111

Cash from Financing Activities (437,910) (442,887) (394,937) (576,972) (494,300)

Net Change in Cash 324,638 (535,805) 371,270 45,199 524,779

Net Cash - Beginning Balance 434,755 759,393 223,588 594,858 135,223

Net Cash - Ending Balance 759,393 223,588 594,858 640,057 660,002

Net Changes in Working Capital 352,870 (309,396) 244,511 197,476 716,874

Free Cash Flow 762,548 (91,542) 704,044 620,934 1,027,091

B. Ratio calculations:

Afriquia Gaz SA | Ratios - Key Metrics

Ratios - Key Metrics

Annual standardized in Millions of Moroccan Dirhams

Industry Median 2019 2020 2021 2022 2023

 36

Earnings Quality Score 53 44 6 92 38 55

Profitability

Gross Margin 35.6% 27.9% 30.0% 23.1% 19.5% 24.8%

EBITDA Margin 30.3% 20.2% 14.5% 14.5% 13.2% 14.4%

Operating Margin 22.7% 15.4% 8.6% 9.6% 9.3% 9.9%

Pretax Margin 21.1% 16.1% 9.5% 10.4% 8.6% 9.0%

Effective Tax Rate 22.9% 31.7% 33.6% 32.2% 36.4% 35.3%

Net Margin 15.8% 11.0% 6.3% 7.1% 5.4% 5.8%

DuPont/Earning Power

Asset Turnover 0.71 0.75 0.74 0.83 0.96 0.88

x Pretax Margin 21.1% 16.1% 9.5% 10.4% 8.6% 9.0%

Pretax ROA 15.8% 12.2% 7.0% 8.7% 8.2% 7.9%

x Leverage (Assets/Equity) 2.16 2.80 2.53 3.35 3.37 2.97

Pretax ROE 28.8% 36.5% 18.8% 25.5% 27.5% 25.1%

x Tax Complement 0.71 0.68 0.66 0.68 0.64 0.65

ROE 23.6% 24.9% 12.5% 17.3% 17.5% 16.2%

x Earnings Retention 0.67 0.39 (0.19) 0.04 0.07 0.00

Reinvestment Rate 12.3% 9.6% (2.3%) 0.8% 1.2% 0.0%

 37

Liquidity

Quick Ratio 1.17 0.86 0.79 0.84 0.70 0.68

Current Ratio 1.36 1.00 0.87 0.90 0.85 0.79

Times Interest Earned 15.8 18.0 8.4 9.3 8.3 5.5

Cash Cycle (Days) 24.1 (102.8) (101.0) (74.3) (60.1) (81.8)

Leverage

Assets/Equity 2.16 2.80 2.53 3.35 3.37 2.97

Debt/Equity 0.29 0.35 0.37 0.33 0.44 0.35

% LT Debt to Total Capital 14.0% 22.2% 20.1% 21.9% 18.4% 22.3%

(Total Debt - Cash) / EBITDA 0.59 0.02 0.28 0.41 0.35 0.45

Operating

A/R Turnover 10.2 2.5 2.9 2.5 2.7 3.0

Avg. A/R Days 35.7 148.6 125.8 144.7 134.4 122.2

Inv Turnover 12.2 9.9 11.0 19.4 13.4 9.9

Avg. Inventory Days 30.0 37.1 33.3 18.9 37.1

27.4

Avg. A/P Days 43.0 288.6 260.2 237.9 221.9 241.1

Fixed Asset Turnover 1.74 1.92 1.62 1.95 2.50 2.10

 38

WC / Sales Growth 2.2% 1.0% (3.0%) (2.9%) (0.8%) (3.3%)

Bad Debt Allowance (% of A/R) 2.4% - - - - 2.6%

ROIC - 16.2% 8.2% 11.4% 11.5% 10.7%

Activity ratios. This category includes several ratios also referred to asset utilization or turnover

ratios (e.g., inventory turnover, receivables turnover, and total assets turnover). They often give

indications of how well a firm utilizes various assets such as inventory and fixed assets.

Activity Industry
2019 2020 2021 2022 2023
ratios Median
Receivables
2.5 2.9 2.5 2.7 3.0 10.2
turnover:
Days of
sales
148.6 125.8 144.7 134.4 122.2 35.7
outstanding
:
Inventory
9.9 11.0 19.4 13.4 9.9 12.2
turnover:
Days of
inventory 37.1 33.3 18.9 27.4 37.1 30.0
on hand:
Fixed asset
1.92 1.62 1.95 2.50 2.10 1.74
turnover:
Avg. A/P 288.6 260.2 237.9 221.9 241.1 43.0
 39

Days

Liquidity ratios. Liquidity here refers to the ability to pay short-term obligations as they come

due.

Industry
Liquidity
2019 2020 2021 2022 2023
ratios
Median

Current
1.00 0.87 0.90 0.85 0.79 1.36
ratio

Quick
0.86 0.79 0.84 0.70 0.68 1.17
ratio

Cash
cycle (102.8) (101.0) (74.3) (60.1) (81.8) ( 24.1)
(days)

Solvency ratios. Solvency ratios give the analyst information on the firm’s financial leverage

and ability to meet its longer-term obligations.

Industry
Solvency
2019 2020 2021 2022 2023
ratios
Median
 40

Debt-to-
0.35 0.37 0.33 0.44 0.35 0.29
Equity

Debt-to-
22.2% 20.1% 21.9% 18.4% 22.3% 14%
Capital

( Total
debt -
0.02 0.28 0.41 0.35 0.45 0.59
cash)/
EBITDA

Profitability ratios. Profitability ratios provide information on how well the company generates

operating profits and net profits from its sales.

Industry
Profitabilit
2019 2020 2021 2022 2023
y ratios
Median

Net profit
11.0% 6.3% 7.1% 5.4% 5.8% 15.8%
margin

Gross profit
27.9% 30.0% 23.1% 19.5% 24.8% 35.6%
margin

Operating
profit 15.4% 8.6% 9.6% 9.3% 9.9% 22.7%
margin
 41

Pretax
16.1% 9.5% 10.4% 8.6% 9.0% 21.1%
margin

EBITDA
profit 20.2% 14.5% 14.5% 13.2% 14.4% 30.3%
margin

Effective
31.7% 33.6% 32.2% 36.4% 35.3% 22.9%
tax rate

Return on
24.9% 12.5% 17.3% 17.5% 16.2% 23.6%
equity

III. Financial Analysis

 Overview about 2019

 Before 2019 Afriquia Gaz was working with IAS 17 (International Accounting Standard

17. Leases) for lease accounting. However, on January 1, 2019, Afriquia Gaz followed the

IFRS 16 which reflects changes in the treatment of lease contracts. since IFRS 16

provides a new framework for recognizing and reporting lease-related financial

information. Applying IFRS 16 had many financial impacts on Afriquia Gaz since we

have an increase in fixed assets: 77,194 thousand DH, in addition to an increase in the

financial debts: 78,676 thousand DH. It also impacted the product and expenses for the

financial year 2019 compared to 2018; it increased charges and depreciation expenses or
 42

rental assets to 25,101 thousand DH. Applying IFRS 16 led to an increase in the financial

charges of 2,410 KDH, furthermore, despite the increased charges and expenses there was

also a positive impact on the 2019 pre-tax income of 1,346 KDH. To sum up, applying

IFRS 16 was beneficial for Afriquia Gaz in 2019.

 Overview about 2020

 In 2020, One major event that affected not only oil and gas industry, but all the industries

in the world which is COVID-19. The industry faced a fall in oil and gas profits because

of lowered demand and low global prices, as well as the requirement to update and

modernize the country's energy infrastructure. domestic production stood at 3,473

terajoules (TJ), while imports soared to 28,194 TJ. The main consumer is the Office

National de l'Electricité et de l'Eau Potable (ONEE), the national water and electricity

utility, with a consumption of 884.3 million cubic meters (mcm), compared to 98.7 mcm

for various industries, including the automotive, ceramic, mechanical and metallurgical,

and pharmaceutical sectors (IEAb, 2023).

1. Income Statement Analysis:

a. 2019-2020

 Gross profit:

The Gross profit decreased from 1 773 819 in 2019 to 1 714 857 in 2020. Due to the decrease in

the total revenue and Cost of Revenue. I think that there is an impact of external economic
 43

factors such as downturns and disruptions especially the global impact of Covid-19 pandemic in

2020; probably lead to the decrease in consumer spending and overall market demand.

 Operating Expenses:

The Operating expenses has decreased from 5,369,298 to 5,222,731. This fall can be a result of a

challenging economic environment, impacting AFRIQUIA GAZ's core business operations. In

addition, the social net result decreased by 19.3%. This decline could partly be attributed to

increased operating expenses, such as those associated with the challenging economic conditions

and the impact of the COVID-19 pandemic.

 Other Non-Operating Income (Expense) and Net Income:

Other Non-Operating Income has increased from 4,180 to 4,288. The Profit Warning indicates

additional factors, such as the impact of the 400 MDH donation, which falls under non-operating

income. The increase in this category could be associated with favorable financial events or

improved management of non-core business activities.

 Operating income

The decrease in operating income from 978,316 to 493,339 may result from reduced sales,

increased expenses, or other operational challenges, contributing to the overall decrease in net

income. In addition to the impact of a 400 MDH donation, which can decrease industrial activity.

This reduction in operating income will be proportional to the company's overall profitability.
 44

 Net income:

The decrease in net income from 699,200 to 362,238 is the result of changes in both operating

and non-operating factors. Even though the increase in other non-operating income partially

offsets the decline, the profitability of the Afriquia Gaz is still low, emphasizing the challenges it

faces in maintaining high profitability.

b. 2020-2021:

 Chiffre d'Affaires (Revenue):

Social revenue for Q4-2021 increased by 51.7% compared to Q4-2020.

 Goss Profit:

The gross profit has decreased from from 1,714,857 to 1,649,266 in 2021. The significant

increase in the cost of revenue from 4,001,213 to 5,483,015 is the primary cause. Even though

total revenue increased to 7,132,280, the gross profit was still impacted by the rise in the cost of

revenue. Furthermore, Tonnage sold for Q4-2021 increased by 2.3% compared to Q4-2020. For

the entire year 2021, tonnage sold improved by 1.4%, showcasing the continuous effort of the

company's commercial activities.

 Operating Expenses:
 45

The operating expenses have increased to 6 450 843 and it's probably due to the increase in

revenue. Because Afriquia Gaz expands its operations, it often incurs additional costs related to

sales, marketing, administrative functions, and other operational activities

 Operating Income

The operating income has increased from 493 339 to 681 437

 Other non-operating income

Total investments for Q4-2021 increased by 17.0% compared to Q4-2020. This has impacted

indirectly other non-operating income, which has significantly increased from 4288 to 21 436.

This impact includes potential increases in interest expenses (incresed by 24%) if external

financing is utilized for these investments, higher depreciation and amortization (increased by

5.29%) charges for acquired long-term assets

 Net income:

Net income has increased from 362,238 to 503,864, because of the notable increase in revenue

and the efforts of Afriquia Gaz to improve its profitability.

c. 2021-2023:

 Gross profit:
 46

The Gross profit margin was hit by an improvement from 1,649,266 to ,2051,759, and this is

mainly due to the high demand from various sectors after the pandemic and the high prices of gas

and oil.

 Operating Expenses:

After the pandemic the oil and gas industry’s price were highly volitile and companies had to

incure higher operating expenses, higher costs of health and safety procedures, investment in

technologie and infrastructure, all these factors led operating expense to fraise by more than

1,000,000

 Operating income

The operating income decreased from 2021 to 2023 due to the decrease of the total revenue and

increase of operating expenses over this period.

 Net income:

Net income before taxes has shown some growth, but the rate of increase has slowed over the

[Link] for income taxes has also increased, affecting the company's overall profitability.

Despite challenges, the company has managed to maintain positive net income, indicating

resilience in its operations.

 47

2. Balance Sheet analysis:

a. 2019-2020

 Assets

It decreased from 8,230,006 to 7,282,011 in 2020. The first reason for this decrease is the

significant decrease in cash and short-term investments of 72% (1 256 851 to 353 953). This was

clearly caused by the pandemic Covid-19.

 Liabilities

The decrease in total long-term debt by 10.23% and the increase in deferred income tax by 3%

have contributed to a reduction in liabilities from 5,288,290 to 4,407,748. This implies a positive

impact on the company's financial position, suggesting a decrease in its overall obligations.

 Shareholders' Equity:

There is a small decrease in Equity since (it was 2 941 716 in 2019 decreased to 2 874 263 in

2021). The explanation for this, is the impact of changes in net income over the years and the low

profitability of Afriquia Gaz.

b. 2020-2021

 Assets

In 2021 the assets of Afriquia Gaz increased from 7 282 011 to 9 869 402 due to the increase in

sales which generate more revenue and cash.

 48

 Liabilities

Liability increased from 4 407 748 to 6 920 964 in 2021 due to the increase in accounts payable

and decrease in short-term debt, and the increase of long-term debt. The increase in accounts

payable during Q4-2021 was probably caused by the firm extending payment terms with

suppliers in response to the spike in tonnage sold. Furthermore, the reduction in short-term debt

signifies a calculated attempt to control liquidity, but the rise in long-term debt corresponds with

the conclusion of noteworthy projects such as the Tanger Med terminal extension.

 Shareholders' Equity

Shareholders Equity has increased to 9 869 402 due to the increase in Liabilities and total equity.

Moreover, it signifies a positive outcome for Afriquia Gaz. The rise in total equity indicates that

the company's assets have expanded, which is the result of new investments, an increase in

probability.

c. 2021 to 2023

 Assets

Afriquia Gaz made a major acquisition that year which consist of a 100% acquisition of Total

Mauritania. Property, plant, and equipment have increased but not significantly. Overall the

assets of Afriquia increased from 2021 to 2022 and decrease from 2022 to 2023.

 Liabilities
 49

From 2022 to 2023 total liabilities have decrease, due to the major acquisition that the company

made.

 Total assets > total liabilities which means Afriquia gaz is a solvent business.

 Shareholders' Equity:

Common stock remained the same, no change in share issuance or paid in capital. Retained

earnings increased very slightly, indicating improvement of profitability, or earnibg retention.

3. Cash flow statement analysis.

a. Operating Activities:

 From 2015 to 2016: Operating activities decreased from 1,040,090 (2015) to 341,894

(2016). Changes in working Capital had a large negative swing; shifted from a positive

352,870 to a negative -309,396. This change in working capital significantly contributed

to the decrease in Cash from Operating Activities.

 From 2016-2017: the operating activities increased from 341,894 (2016) to 1,004,957

(2017): the working capital Increased from a negative -309,396 (2016) to a positive

244,511 (2017). Signaled a positive shift in the company's working capital dynamics. In

addition to the increase in assets, liabilities, and net income

 From 2017 to 2018: Cash from operating activities increased from1,004,957 to

1,099,264. This increase can be attributed to a significant increase in net income/starting

line and depreciation, which positively impacted operating cash flow.

 50

 From 2018 to 2023: Cash from operating activities continued to increase, reaching MAD

1,484,757 in 2023. This growth is mainly due to a substantial increase in changes in

working capital, indicating efficient management of working capital over the period.

b. Investing Activities

 From 2015 to 2016: Investing Activities Increased due to the Capital Expenditures and

Purchase of Fixed Assets increased from (277,542) to (433,436).

 From 2016 to 2017: Investing Activities Decreased, because of the decrease in Capital

Expenditures and Purchase of Fixed Assets from (433,436) to (300,913). In addition to

the notable increase in other Investing Cash Flow Items from (1,376) to 62,163.

 From 2017 to 2018: Cash used in investing activities decreased from MAD (238,750) to

MAD (477,093). This decrease is primarily due to a decrease in capital expenditures and

purchase of investments.

 From 2018 to 2023: Cash used in investing activities remained relatively stable,

decreasing slightly to MAD (465,678) in 2023. There were fluctuations in capital

expenditures and other investing cash flow items, but overall the impact on investing

activities was not significant.

c. Financing Activities

 From 2015 to 2016: Financing Activities Increased: The increase in financing activities in

2016 was driven by changes in the issuance and retirement of long-term debt. The

company issued more long-term debt and simultaneously retired

 51

 From 2016 to 2017: The decrease in financing activities in 2017 is a result of the Less

borrowing (Long Term Debt Issued increased less). Less debt repayment (Long Term

Debt Reduction decreased). And the increase in cash dividend

 From 2017 to 2018: Cash from financing activities decreased from MAD (394,937) to

MAD (576,972). This decrease is mainly due to a decrease in issuance (retirement) of

debt, net.

 From 2018 to 2023: Cash from financing activities decreased slightly further to MAD

(494,300) in 2023. The decrease is primarily attributed to a decrease in total cash

dividends paid and long-term debt issued.

d. Net Change in Cash:

 From 2015 to 2016: Net Change in Cash increased by 324,638. This indicates a positive

change, with the company gaining more cash than it spent during this period.

 From 2016 to 2017: Net Change in Cash decreased by 535,[Link] reflects a negative

change, suggesting that the company's cash decreased more than it increased during this

period.

 From 2017 to 2018: The net change in cash increased from MAD 371,270 to MAD

45,199. This significant decrease is mainly due to changes in cash flow from operating

and financing activities.

 52

 From 2018 to 2023: The net change in cash increased substantially to MAD 524,779 in

2023. This increase reflects the positive trend in operating cash flow and efficient

management of financing activities, resulting in improved cash position.

e. Free Cash Flow:

 From 2015 to 2016: Free Cash Flow decreased to (91,542). Indicate a negative free cash

flow, suggesting that the company spent more cash than it generated from its operations

and investments during this period.

 From 2016 to 2017: Free Cash Flow increased to 704,044. It suggests that the firm made

more money from operations and investments than it spent during this time, indicating a

positive free cash flow.

 From 2017 to 2018: Free cash flow increased from MAD 704,044 to MAD 620,934. This

decrease is mainly attributed to the decrease in net income/starting line.

 From 2018 to 2023: Free cash flow increased significantly to MAD 1,027,091 in 2023.

This increase indicates improved cash generation capability and efficient capital

management over the period.

 Free Cash Flow within a report period can be affected by management's decisions of

capital spending. Therefore, it is important to look at long term when it comes to

Free Cash Flow

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a. Ratio Analysis of 2019- 2021

Activity Ratios:
Receivable Turnover:

 From 2019 to 2020: the recievable turnover increased from 2.5 to 2.9. The reason for this

increase might be the issuance of a new bond on April 23,2020 which was approved with

strong shareholder support.

Days of sales outstanding:

 From 2019 to 2020: the days of sales outstanding: decreased from 148.6 to 125.8 which

can be a result of the increase in receivable turnover, which suggests an improvement in

collecting payments faster.

Inventory turnover:

 From 2019 to 2021: the inventory turnover increased from 9.9 to 19.4 in 2019. The

issuance of new bond for 600 000 000 MAD provides Afriquia Gaz with additional

funds; that can be used to optimize inventory management or invest in more efficient

supply chain processes

Days of inventory on hand:

 From 2019 to 2021: The decrease in days of inventory on hand decreased from 37.1 days

to 18.9 is a positive sign. It suggests that Afriquia Gaz is doing well in terms of using up

its inventory levels more quickly, which aligns with the improved inventory turnover.
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Liquidity Ratios:
Afriquia Gaz has experienced an important change in its operational and financial performance.

According INDICATEURS D’ACTIVITÉ DU 1er TRIMESTRE 2021 d'Afriquia gaz, there is a

6.9% decrease in tonnage sold, attributed to decline in the demand for Gas following the

exceptional demand in 2020 caused by Covid-19 pandemic and the health emergency declared in

March 2020. These have many impacts on the changes of liquidity ratios over time.

Current Ratio:

 From 2019 to 2020: the current ratio dropped from 1.00 to 0.87. This decline is attributed

to Afriquia Gaz's reported decrease in social revenue, amounting to 1,656 MDH, driven

by reduced tonnage and a decline in the international price of liquefied petroleum gas

(GPL).

 From 2020 to 2021: it increased to 0.90 which might be because of investments in the

same period amounting to 83.7 MDH, marking a 23.5% decrease from the previous year,

with a focus on injecting new bottles to meet market demands.

 The decrease in investments might suggest a reactionary approach in managing

current liabilities, which can lead to this increase in the current ratio.

Quick ratio

 From 2019 to 2020: decreased from 0.86 to 0.79 which demonstrates potential difficulties

in meeting short-term obligations without relying on inventory.

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 From 2020 to 2021: increased from 0.79 to 0.84 which indicate that Afriquia Gaz is

becoming more liquid, and can generate cash quickly compared to 2020

Solvency Ratios:
Debt to Equity:

 From 2019 to 2020: The debt-to-Equity ratio was 0.35 in 2019 it rose to 0.37 this

suggests a higher proportion of debt relative to equity.

 from 2020 to 2021: decreased to 0.33, this indicates a reduced reliance on debt for

financing.

Debt to Capital:

 From 2019 to 2020: decreased from 22.2% to 20.1% It is almost stable, ranging between

18.4% and 22.3%. This fluctuation between 18.4% and 22.3% means there is a consitent

balance between debt and total capital employed by the company.

(total debt- Cash)/ EBITDA:

 There is a significant change because it increased from 0.02 in 2019 to 0.41in 2021, and

from 0.41 in 2021 to 0.45 in 2023. A higher ratio indicates a relatively higher level of

debt compared to the earnings before interest, taxes, depreciation, and amortization

(EBITDA). For this reason, the increasing trend in this ratio signals an escalating

financial risk. The Afriquia Gaz's ability to cover its debt obligations with EBITDA has
 56

decreased over time, suggesting a potential challenge in servicing debt from operating

profits.

Profitability ratios:
Net profit margin:

 it decreased from 11.0% in 2019 to 6.3% in 2020. However, in the next year it increased

to 7.1%. Afriquia Gaz has published a profit warning in the first half of 2020 due to the

COVID-19 pandemic and the significant impact of a donation (400 million MAD) made

to fight against the virus. Therefore, this donation might be the reason for the decrease in

the net profit margin due to the slowdown in industrial activities, and a devaluation of

raw material stocks. The subsequent year saw a modest recovery but remained below the

2019 level.

Gross profit:

 It was 27.9% in 2019, then it increased by 2.1% in 2020, but it decreased to 23.1% in

2021. This increase could be because of effective management and increased sales which

have positively influenced gross profit margins. However, the challenges from the

previous year might have contributed to affecting Afriquia gaz’s Gross profit margin.

Operating profit margin:

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 In 2020, Afriquia Gaz faced a substantial decline in its operating profit margin from

15.4% to 8.6%, a shift primarily attributed to the impact of a substantial COVID-19

donation and industry-related challenges. Afriquia Gaz issued a profit warning,

anticipating a 15% decline in net results for the first half of 2020. The challenges,

particularly the financial impact of the donation, likely disrupted operational efficiency,

contributing to the observed decrease. However, in 2021, despite ongoing challenges,

Afriquia Gaz expressed confidence in overcoming these difficulties; which demonstrated

by the increase of the operating profit margin to 9.6%

b. Ratio Analysis of 2021-2023

Activity ratios
Receivables Turnover:

 from 2021 to 2022: Increased from 2.5 to 2.7, Improved collection practices or tightened

credit policies might have been implemented, leading to quicker collection of receivables.

 from 2022 to 2023: Increased from 2.7 to 3.0. Possible reasons could include relaxed

credit policies or an increase in sales on credit terms, leading to longer collection periods

and slower receivables turnover.

 However, it takes longer compared to industry median which is 10.2.

Days of Sales Outstanding (DSO):

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 from 2021 to 2022: Decreased from 144.7 days to 134.4 days, due to the increase of the

receivables turnover.

 from 2022 to 2023: Decreased from 134.4 days to 122.2 days. Continued efforts to

increase the receivables turnover ratio.

 Afriquia Gaz has a longer collection period of sales than its industry median which

represents 35.7 days

Inventory Turnover:

 from 2021 to 2022: Decreased from 19.4 to 13.4. oil and gas prices increased

significantly during this period, supply chain disruptions caused by covid 19 have

impacted the company's ability to sell and replace inventory quickly.

 from 2022 to 2023: Decreased from 13.4 to 9.9. due to the continued increase of prices,

due to the impact of covid 19 and the high demand of oil and gaz.

 Compared to industry median, the company is very low on its collection that

represent 9.9 compared to industry 12.2

Days of Inventory on Hand (DOH):

 from 2021 to 2022: Increased from 18.9 days to 27.4 days.

 from 2022 to 2023: Increased from 27.4 days to 37.1 days.

 Longer collection period compared to industry median 30 days.

Fixed Asset Turnover:

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 from 2021 to 2022: Increased from 1.95 to 2.50. Efficiency improvements in operational

processes, utilization of existing assets, or investments in technology and infrastructure

might have led to higher sales generated per fixed asset. Total assets increased from

9,869,402 to 10,010,621 and revenues from 7,132,280 to 9,510,065.

 from 2022 to 2023: decreased from 2.50 to 2.10. total assets decreased from 10,010,621

to 8,818,442, and revenue from 9,510,065 to 8,257,014.

 The company is doing far better than the industry median which represents 1.74.

Liquidity ratios
Current ratio:

 From 2021 to 2022, the current ratio decreased from 0.90 to 0.85. current liabilities

increased from 5,359,866 to 5,544,143, and current assets decreased from 4,830,762 to

4,695,328 which justifies the decrease of the ratio, and the worsening of the liquidity

position in the short term.

 From 2022 to 2023, it further decreased from 0.85 to 0.79. Similarly, the current assets

decreased significantly, however current liabilities decreased to, but it is still higher than

the current assets.

Quick ratio

 From 2021 to 2022, the quick ratio decreased from 0.84 to 0.70.

 From 2022 to 2023, it decreased again from 0.70 to 0.68.

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Similar to the current ratio, this indicates a decline in the ability to meet short-term obligations

with highly liquid assets. The quick ratio considers only the most liquid assets (usually cash and

accounts receivable, excluding inventory and prepaid expenses) against current liabilities.

Cash Cycle: (how many days it takes a company to convert cash spent on inventory back into

cash by selling its product)

 From 2021 to 2022, the cash cycle decreased significantly from -74.3 days to -60.1 days.

Increased but still good.

 However, from 2022 to 2023, it increased again from -60.1 days to -81.8 days. Is low and

still decreased more.

 Here we have a negative cash conversion cycle which basically means Afriquia Gaz’s

vendors are financing their business operations.

Solvency Ratios:
Debt to Equity:

In the calculation of Debt to Equity, we use the total of Short-Term Debt & Capital Lease

Obligation and Long-Term Debt & Capital Lease Obligation divided by Total Stockholders

Equity. In some calculations, Total Liabilities is used to for calculation.

 From 2021 to 2022, the debt-to-equity ratio increased from 0.33 to 0.44.

 From 2022 to 2023, it decreased slightly from 0.44 to 0.35.

 61

The increase from 2021 to 2022 indicates that the company took on more debt relative to its

equity, suggesting increased leverage.

The subsequent decrease from 2022 to 2023 suggests a reduction in leverage, bringing the

company's debt-to-equity ratio closer to its 2021 level.

Debt to Capital:

 From 2021 to 2022, the debt-to-capital ratio increased from 21.9% to 18.4%.

 From 2022 to 2023, it increased again from 18.4% to 22.3%.

The decrease from 2021 to 2022 showcases a decrease in the proportion of debt relative to the

company's total capitalization.

However, the followed increase from 2022 to 2023 indicates a reversal of this trend, with debt

comprising a larger portion of the company's capitalization.

(total debt- Cash)/ EBITDA:

A high Debt-to-EBITDA ratio typically indicates that a corporation will take more time to pay

off its debt. According to Joel Tillinghast's "Big Money Thinks Small": Biases, Blind Spots, and

Smarter Investing: A debt-to-EBITDA ratio greater than four is typically regarded concerning

unless tangible assets cover the debt.

 From 2021 to 2022, the ratio increased from 0.41 to 0.35.

 From 2022 to 2023, it further increased from 0.35 to 0.45.

 62

The decrease from 2021 to 2022 suggests an improvement in the company's ability to repay its

debt obligations using its earnings before interest, taxes, depreciation, and amortization

(EBITDA).

In the other hand, the increase from 2022 to 2023 indicates a deterioration in this ability, as the

company's total debt (excluding cash) relative to its EBITDA increased.

Profitability ratios:
Net profit margin:

Net margin is calculated as Net Income divided by its Revenue. According to Gurufocus

Afriquia’s net margin is ranked better than 54.18% of 980 companies in the oil and gaz industry

in 2023, and according to the same source. Net Income and Earnings-per-Share (EPS) are the

most widely used parameter in measuring a company's profitability and valuation, it is the least

reliable. The reason is that reported earnings can be manipulated easily by adjusting any numbers

such as Depreciation, Depletion and Amotorization and non-recurring items.

But the long-term trend of the net margin is a good indicator of the competitiveness and health of

the business.

 From 2021 to 2023: a decrease from 7.1% to 5.8%

 indicating a decline in the company's ability to generate profits relative to its revenue

over this period.

Gross margin:
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From 2021 to 2023: an increase from 23.1% to 24.8%

The company has improved its ability to control the cost of goods sold relative to its

revenue

If a company loses its competitive advantages, usually its gross margin declines well before its

sales declines. Watching Gross Margin % and Operating Margin % closely helps avoid value trap

situations.

1. Greater than 40% = Durable competitive advantage

2. Less than 40% = Competition eroding margins

3. Less than 20% = no sustainable competitive advantage

 Since Gaz’s gross margin in 2023 is 24.8% which is less than 40% and higher than

20%  competition eroding margins

Operating profit margin:

 From 2021 to 2023: 9.6% increased to 9.9%.

 There is a slight increase in operating profit margin from 2021 to 2023, indicating a

marginal improvement in the efficiency of the company's operations in generating profits

before interest and taxes.

 64

 When facing competition, a company’s operating margin may decline, and it usually

declines before revenue or eve profit decline, it is considered a very important indicator

of whether the company is facing problems.

 65

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 66

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