Axxela's Revenue Skyrockets by 56% to $291.2m in 2023

Axxela Limited’s revenue increased markedly by 56.2% to N188.1 billion ($291.2 million) in the financial year which ended 31 December 2023 largely benefiting from the Naira depreciation against the USD during the second half of 2023, as sales are majorly invoiced in USD.

This momentum was maintained during the first five months of 2024 supported by the significant ramp up in sales volume by an annualised growth of 37.5% (2023: negative 2.1%; 2022: 0.4%).

The solid revenue growth combined with strong operating efficiency have resulted to the EBITDA margin sustained above 17.0% between 2022 and 2023 and increasing further to 19.3% during the 5M 2024 despite the high inflationary pressure.

Debt load

Axxela’s gross debt spiked to N123.6 billion in May 2024 from N66.6 billion in December 2022, raised from various financial institutions and bond issuances.

The elevated debt was also impacted by the significant depreciation of the Naira, which resulted in the USD denominated shareholder loan more than doubling by May 2024, compared to December 2022.

While Axxela has repaid part of this loan, the Naira value remained elevated, thus affecting the overall debt level.

Nevertheless, net debt to EBITDA improved to 1.2x in May 2024, from 2.9x in 2023 (2022: 2.3x), supported by robust earnings and sizable cash holding (as much of the borrowings have yet to be utilized).

Other gearing metrics also remain strong, with operating cash flow (OCF) coverage of gross debt improving to 15.8% in 2023 and further to 129.8% in May 2024 (2022: 1.0%) largely supported by higher inflows from cash generations and receivables.

Similarly, EBITDA coverage of net interest improved to 9.2x in 2023 and further to 10.2x during the 5M 2024 (2022: 6x) strengthened by the improvement in earnings and relatively modest interest income despite the elevated debt.

Looking ahead, the group anticipates an additional N20 billion new debt funding in 2024 and N8 billion in 2025 to fund its ongoing expansion projects.

To mitigate the currency risk, Axxela intends to exercise its right to convert the USD denominated shareholder loan to redeemable shares following the recent board approval. This is also necessitated by the current Central Bank of Nigeria’s prohibition of the non-deliverable forward contract to hedge against adverse exchange movement.

“We view that the successful loan conversion would materially enhance the overall leverage position going forward,” GCR Ratings said.

Cash position

Axxela’s had robust cash holding of N47.7 billion as of May 2024 and a sizable, committed facility of N58.6 billion available for working capital utilisation.

Through a special purpose vehicle namely Axxela Funding 1 Plc (the issuer), incorporated by Axxela, the latter has raised two bonds under two bond issuance programmes of N50Bn each, registered by the Securities and Exchange Commission. The group’s existing bond issuances comprise N11.5 billion series 1 senior secured bonds (secured bonds) and N16.4 billion series 1 senior unsecured bonds (unsecured bonds) raised in May 2020 and April 2024, respectively.

The secured bonds are direct, irrevocable and senior secured obligations of the issuer, and at all times rank pari passu with other similarly ranking obligations of the issuer and without any preference among themselves. The secured bonds mature in 2027 and have a coupon rate of 14.3%.

The security on the secured bond is created over Axxela’s trade receivables due from its take or pay contracts, held in trust under an existing security deed, in addition to the assets pledged by Axxela.

About Axxela

Axxela has maintained a strong competitive position within the gas distribution niche of the Nigerian oil and gas sector, supported by the ongoing capacity expansion and diversified business segments which have boosted sales volumes and revenue generation.

Axxela’s competitiveness is enhanced by the long-standing partnership with NNPC Gas Marketing Company Limited (NGML) which has helped to expedite the development of new projects.

Furthermore, Axxela is on track with the proposed construction of a mini liquified natural gas project in Ajaokuta, Kogi State, which would further enhance product diversification and strengthen its competitive position, once completed.

The group continued to grow its regional businesses, supplying gas to Togo through the West African Gas Pipeline, and is making inroads into Benin Republic and Ghana.

Axxela is a designated natural gas shipper on the West African Gas Pipeline (WAGP). Axxela is also the pioneering private sector-led developer of natural gas distribution in Nigeria, delivering at peak 80 million standard cubic feet per day to over 160 industrial and commercial customers via a vast network of gas infrastructure.

With over 280km in gas pipeline infrastructure built, Axxela provides unique energy solutions primarily through its subsidiaries: Gaslink Nigeria Limited, Gas Network Services Limited, and Central Horizon Gas Company Limited.