ONICO Group’s consolidated sales revenue hit PLN 3.06 billion in 2018, a 9 percent climb on the previous year. This is the second best result in the Company’s history and only little less than the record-breaking revenue of PLN 3.15 billion for 2016. The profit on sales was PLN 19 million as compared to PLN 7.1 million in 2017 and the operating profit was PLN 7.4 million (PLN 15.1 million in the year before).
In net terms, the Group posted a loss of PLN 21.2 million compared to PLN 10.7 million in profit in 2017 but the Management Board emphasises that, in large part, this is due to two one-off events.
ONICO Group held 41,200 tonnes of mandatory inventories funded by foreign currency credit facilities at the end of 2018. The year end saw a negative valuation of the credit facilities in relation to the value of the inventories measured at historical exchange rates. As a result, unrealised exchange losses of PLN 9.5 million had to be recognised, inevitably affecting the Company’s financial performance. ONICO's Management Board points out that this is a temporary figure and the negative effect will be eliminated at the point of resale of the inventories.
Moreover, the cost of products sold for 2017 was found to have been wrongly recognised at PLN 15.2 million (the figure was adjusted through P/L carried forward in the current period). The Company’s Management Board took a deep dive revealing that the issue had resulted from an error in the biocomponent mixing calculation algorithm and the rolling effect of that error, which had compounded over a long period of time, as well as its small scale in relation to the value of goods sold (0.7 percent) all contributed to its hard detectability. To avoid reoccurrence, the Management Board implemented additional controls and reinforced the Financial Controlling function.
In addition, the deteriorating payment status of its customers forced the Company to recognise impairment charges of PLN 9.56 million on receivables.
Have it not been for those one-off events, the Company’s 2018 bottom line would approximate a dozen or so million zlotys in profit.
ONICO Group has taken action to improve its performance. A cost-cutting programme was implemented and an in-depth analysis of profitability across the Group companies was undertaken. A decision was made to reduce funding of the Group’s ancillary activities and to focus on selling liquid fuels.
The Company’s Management Board concludes that despite the errors made in 2017 to 2018, the Group continues to pursue a highly profitable core business, which is fully capable of maintaining profitability and the growth momentum of the periods preceding 2018 once the financial accounting errors are eliminated.