22 September 2016, Comments Comments Off on Masana Petroleum Solutions picking up speed

Masana Petroleum Solutions, which sells diesel, bitumen and chemicals to the commercial and industrial sectors, wants to grow its business within its existing market, MD Abhay Raichoora says.

Masana, which earned sales revenue of R9.6bn last year, was spun out of global oil major BP SA 11 years ago. BP SA retains a 50.5% stake, with another 35% held by black empowerment shareholders and 14.5% by an employees’ trust.

Major oil companies are under pressure to increase their black ownership levels after slow progress in the past decade.

Earlier this year Masana’s two black shareholders, WDB Investment Holdings (WDBIH) and the Mineworkers Investment Company (MIC), sold their shares back to Masana at a price based on independent valuation.

Though last year’s oil price hit multiyear lows, apparently making it a bad time to exit, Raichoora says for a wholesale marketing company, a low oil price stimulates business as it makes its products cheaper.

The exit of WDBIH and MIC was followed by the company issuing invitations to new empowerment entities to bid for that stake. The winning consortium is 40% owned by Kwande Capital, 40% by Ata Capital and 20% by Identity Capital.

Raichoora says this sale process was followed rather than a direct sale by WDBIH and MIC because Masana wanted to select the right strategic partners who would maintain the company’s black empowerment shareholding and invest their own capital, rather than requiring vendor financing. They are not required to play an operational role but to give input at board level.

Kwande Capital is invested in the mining and energy sectors, where it is the lead member of the black consortium holding a majority stake in Spring Lights Gas, the KwaZulu Natal supplier of piped gas to the industrial and commercial sectors.

Masana’s focus is on the business-to-business segment. Its customers include mines, power utilities and consumer goods companies. Two of its biggest customers for diesel and transport management solutions are Shoprite and Nestlé.

In January Masana bought BP SA’s chemicals business (including mining solvents and white spirits) and its Castrol mining lubricants division. Raichoora says these complement Masana’s existing operations because they serve the same customers.

Though the mining sector is going through a downturn, Raichoora says it is a good time to buy these assets, as Masana is taking a long-term view. It believes the current weakness in SA’s mining and agricultural sectors is cyclical, not structural, and both will recover in time.

Other growth opportunities lie in mergers with and acquisitions of competitors in what is now a fragmented market, to increase its presence in diesel and bitumen distribution.