Fuel retailers feel the pinch

2008-07-21 00:00

Beleaguered filling station owners in and around Pietermaritzburg have seen their profitability outlook deteriorate significantly in the wake of rising fuel prices and a levelling off in fuel sales this year.

Several owners who spoke to The Witness are all in agreement that the business terrain is “tough” at present.

Many owners have noticed a drop in petrol consumption over the past few months.

They said that their retail profit margin has also come under pressure following repeated fuel price hikes.

The fact that the average owner is required to finance the purchase of fuel in cash within a day or two of buying a fuel load means that this cash-intensive business model is under even more pressure.

Wayne Smith of Quarry Service Station in Hilton said their margins have dropped by about three percentage points over the past two years or so to about six percent.

“To run this business, a retail business with margins of less than six percent, is bordering on insanity and you must add to this the fact that this is a high risk business in terms of safety and security,” said the owner of VIP Service Station, Parbhu Matharparsadh.

Jenny Duckham of Pat Duckham Motors said: “We are only making 64,7 cents per litre out of the R10,40 per litre price [of petrol]. They [government] do review the retail profit margin now and again … but it is usually once a year. The higher the price, the lower our margin becomes.”

Veniyak Maney of Maney’s Service Station in Raisethorpe said although their “forecourt traffic” has remained healthy, motorists are now spending less.

He said their sales have dropped off fairly noticeably in 2008.

He believes that this is happening at most filling stations in the northern suburbs.

Duckham said although they experienced a rise in sales during May, volumes have remained stagnant for much of this year.

The owner of Hlope Motors, Bongi Hlope, said sales have dropped this year.

An average load of fuel can cost between R300 000 and R400 000.

“We’re being squeezed on the working capital. Petrol price increases are making business very difficult. Wage increases toward the end of last year also added to our costs,” said Hlope.

“We buy petrol cash. Cash flow is very important,” said Matharparsadh.

kavith@witness.co.za

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