Rationalisation in Irish oil distribution

David Blevings

David Blevings of the Northern Ireland Oil Federation

Rationalisation of the Northern Ireland (NI) oil distribution sector has stepped up a gear. Several businesses have been acquired by former competitors and one has gone into liquidation

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Recent sales

  • Eastside Fuels was purchased by Morrow Fuels in April 2012 
  • Castlereagh Fuels is now operating from Finlay Fuels premises
  • Brian Corbett Fuels was purchased by Stanley Gordon in April 2012
  • Kingsberry FuelsBelfast operation was sold to Hayes Fuels
  • Campsie Fuels inDerry was sold to LCC in April 2012
  • Armagh Fuels went into liquidation during June 2012
  • Maxol Direct was sold to EMO in October 2011

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David Blevings of the Northern Ireland Oil Federation commented: “Rationalisation has been underway in the GB market for several years but it’s only getting started locally.

“There’s little doubt that NI is oversupplied with distributors – there are some 250 businesses serving a market of around 500,000 oil users. Many of these are small to medium sized family businesses that have enjoyed a positive return for a number of years.

“While oil retains the lion’s share of the local home heat market, it’s slowly being eroded by alternative fuels. Add to this customer loss, reduced demand, meagre profitability and poor cashflow, and you can see the rationale for the contraction and sadly, the demise of some businesses.

The need to be realistic, robust and profitable

“Too many local distributors work on a cash basis and don’t employ monthly management accounts. To survive in today’s economic climate you must have a realistic business plan. Your business model must be robust, realistic and give you a clear indication of where you need to position yourself to make a profit this year”, added David.

Fuel Oil News spoke to distributors in NI and the Republic:  Jack Irwin, of Lisburn-based Irwin Fuels is looking forward to embracing the challenges in the market.  “Irwin Fuels is heavily biased towards the domestic sector, and as a long-established family business has a core of very loyal customers. However, with the current economic situation and a poor winter, those customers are buying smaller amounts and margins are being eroded.

“We’re trying to push the boiler scrappage scheme – we have an optimistic view of its benefits.  Overall, given the circumstances, we’re happy with the company’s current position.”

Another distributor in Northern Ireland spoke of ‘cautious optimism’ in the domestic sector.  “Whilst economic confidence remains low, a needs must attitude has been adopted by the domestic customer.  With the heating market seeing an unseasonal lift in demand due to recent inclement weather, margins have held and quantities ordered have been increasing. There are still a lot of empty tanks out there, and coupled with hopefully a decent winter, it could be a long overdue profitable year for oil distributors.”

Others are less convinced….

Laura Gilpin of Belfast & Down Oil Supplies said: “The oil market’s still challenging, but it’s tough for any business.  We’re hoping that distributors here inNorthern Ireland will try and take the necessary margins needed to keep people employed and vehicles on the road to service this industry.”

An anonymous comment on the Fuel Oil News website regarding the state of the industry in Northern Ireland read: “The reason behind the sad state of the market is primarily one of over supply, both in terms of the excessive number of small operators with tankers, and the number of larger distributors acting as wholesalers.  Combine these factors with the decreasing demand for kerosene and gas oil, and the recipe for a continued financial disaster is very obvious!”

In the Republic of Ireland, it’s a similar story. “The price of oil is high, and the euro’s weak, meaning many people can’t afford to buy as much as they were doing previously. Trade will continue to be affected, and at the moment we don’t know how things will develop.”

A second distributor agreed. “We’re finding the market very challenging at the moment. Many companies are currently working for no margin, and are now a very high credit risk.”

To reiterate a comment from John Switzer in last month’s issue. “Despite the doom and gloom, it’s important to remember that opportunities for growth and success do remain.”

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