"70% of our sales go through the Tarkwa terminal, which reconfirms our strategic decision to provide a one-stop lubricant location for the mining sector."
How has Dutylex performed over the past year and what have been the key business developments?
West Africa has been going through a tough year due to the global economic crisis and it has become very difficult to sell into economies rippled by soaring inflation. In Ghana, the depreciation of the Cedi has made it more difficult to pay our suppliers in US$ and has shrunk our margins in the process.
Because of these factors, our growth has been stalled and we had to cut back on CAPEX. We had planned for a bullish 2022, aiming to execute several capital investments by building new terminals across the country but the reality has been different.
However, we managed to open the first sole lubricant terminal in Tarkwa, an investment of US$3.5 million. The Dutylex lubricant terminal provides an end-to-end solution for mining companies and stocks on average about 1 million liters of oil. This is the first-of-its-kind in the country and 70% of our sales go through the Tarkwa terminal, which reconfirms our strategic decision to provide a one-stop lubricant location for the mining sector.
How are you managing higher operational expenses?
While CAPEX has been reduced, we have also been diligent on OPEX to ensure we stay viable as a business. The biggest expense (75%) is buying the products from Petro Canada lubricants, freight, and insurance of the products to various parts of West/Central Africa. Taxation, transport, warehousing, vehicles, salaries, and interest on loans makes up the rest. The challenge is passing on the increased costs to clients in an environment of heightened price sensitivity. Passing on inflated costs is tricky because we risk our products being perceived as pricy compared to the competition even though our products are of premium quality. It takes time to educate the market on the difference that quality lubricants can make because of the general appetite for cheap products.
With inflation driving the need for optimal efficiencies, is there an argument to be made for quality lubricants creating downstream savings in the longer run?
By taking a longer-term view of the benefits of quality lubricants and investing in efficiency, you save money. The market needs to understand that though lubricants are a small part of the overall mining operational cost, inferior lubricants have shorter interval drain time, causing high maintenance costs and frequent spare parts replacement, leading to high total operational costs.
Dutylex entered the market just three years ago whereas many of our competitors have been in the industry for longer, and by virtue of their brand presence, are associated with quality even though that is not the case.
Dutylex is a premium lubricant solution provider, and we will be dominating this space in the years to come, but it is a journey. I am confident that by continuing to follow our growth strategy as well as positioning ourselves as a high-end solution provider, we will win a good share of the market.
Based on the demand trends you are picking up on, to what extent is ESG factored in when choosing lubricants?
Lubricants are the hearts of all equipment and, as the world shifts towards renewables, so will Dutylex. In this sense, I cannot think of a better example than Petro Canada Lubricants products, where most the oils are 99.9% purified and they offer a wide range of biodegradable products. We are working with some of our clients in West Africa to support them with biodegradable oils and the interest is growing in this option.
While the shift from fossil fuels to renewables is more the new normal in Europe and America, Africa is slowly catching up, and we see that awareness to be growing. With that said, Africa must jump on the bandwagon so that it is not left behind.
What are your key priorities moving forward?
In the current environment, we need to be careful with CAPEX but our goal of expansion into West/Central Africa remains on our agenda. We will grow by forming meaningful partnerships, minimize risks, and collaborations will be key. The extractive industries of West/Central Africa will be important for us going forward.