Profiting from petroleum products distribution

Tuesday October 22 2013

Profiting from petroleum products distribution

A man offloads drums of petroleum products from a truck at the company depot in Namanve, Wakiso District recently. Inset is Anthony Birulu. Photos by Abubaker Lubowa. 

By Faridah Kulabako

Timing is everything, they say. And this true for Anthony Matthew Birulu, the founder and managing director of Bwik Petroleum, who resigned his job with no proper plan for days ahead.

Although he had not given much thought to self-employment at the beginning of his career with Imperial Resort Beach Hotel in the early 2000s, he did not imagine that he would later join the business world, with a new establishment - Bwik Petroleum, a wholesale petroleum products distributor.

His story has its genesis at Imperial Resort Beach Hotel where he rose through the ranks to front officer supervisor, and later to a night manager at the hotel in 2004.

Moving on
But because he had just wedded, Birulu thought the night shifts would not be ideal for his young family and as such, he opted out of the job and moved on to Mogas Uganda as a sales executive in charge of specialties before being promoted to sales manager in charge of selling Bitumen, fuel and lubricants.

His new job with Mogas ushered him into a new world of business. This later inspired him to work out a plan that would see him establish his own business.

The challenges
Although the business has had some challenges, Birulu says he has achieved a number of things, including a steady growth in sales from Shs1.15 billion six years ago, to Shs1.25 billion in 2010 and Shs4.8 billion in 2011.

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However, growth contracted to Shs3.6 billion in 2012 due to economic challenges in the global and local markets. But Birulu expects sales to rebound with a projection of more than Shs5 billion this year.

Bwik Petroleum has in the last three years been among the medium sized companies recognised for their excellent performance in the annual Top 100 Mid-sized companies initiative supported by KPMG, Stanbic Bank and Monitor Publications Limited.

According to Birulu, in the three years, the company’s ranking has continued to improve, moving from 53rd in 2011 to 20th last year.

Turning point arrives after staff are laid off
In 2007, Mogas had a financial squeeze which forced the company to down-size. Thus a number of staff lost their jobs as Mogas tried to cut down its expenditure. Birulu was among those who opted to resign.

“The morale to work had extremely gone down and I thought I was not adding much value to the company; so I decided to quit,” he explains. I was out of employment for about two months as I pondered my next move.”

“It was at this point I decided not to look for another job but rather go private, thus the birth of Bwik Petroleum in 2007.”

The company deals in the wholesale distribution of petroleum products including refined fuel – petrol, diesel and kerosene, Heavy Fuel Oil (HFO) – black oil for burning in factory furnaces to generate heat – and Bitumen which is used in road construction.

“We started with a few customers and it has been a success story since then,” Birulu, told Prosper in an interview recently.

Part of the Shs7 million initial capital came from his own savings, while the biggest percentage was employee benefits he got from Mogas after he had resigned.

“Petroleum is a very capital intensive business, but we managed to start, riding on the trust of customers who I had interacted with me during my former job. We have never got enough capital six years down the road but we are surviving,” he notes.

“In business, trust is everything, if you don’t win the trust of your customers, you can’t survive,” he adds.

The business sources fuel products from Nakuru, Eldorete and Kisumu, western Kenya, furnace oil from Mombasa while Bitumen is imported from Egypt and Iran.

Challenges
According to Birulu, the market is a bit overcrowded and has too much competition.

The Shs3.6 billion investment, has according to Birulu managed to keep the firm afloat by identifying its core strength, which is superior service delivery, diversification, adopting a futuristic pricing model and establishing a good reputation among customers.

“We price our products on the philosophy of small but sustainable profits rather than big unattainable profits,” he says.

Diversification has helped support the business in times when fuel, which is susceptible to price volatilities, experiences a drop in price.

“There is too much competition in the fuel sector yet is a high turnover business that is less profitable.”

A fall in fuel profits is always offset by profits from Bitumen and Heavy Fuel Oil. Bitumen is a low turnover product but with better profits,” he says.

The business boasts of Shs280 million monthly turnover from heavy fuel oil and about Shs200 million from Bitumen.

Despite importing all the products Bwik Petroleum sells, Birulu says he overcame the challenge of turbulence in the foreign exchange market by undertaking forward looking contracts with banks to guard against fluctuations.

With a sales and marketing background, Birulu understands the market better and is the kind of person that the such a business would want.

And because the firm doesn’t own a depot, the products are delivered directly to the customer sites on importation.

It’s Birulu’s responsibility to market the products while still in transit and at times before shipping to ensure that by the time they enter Uganda, it is transported to the customer’s site directly.

This kind of strategy, he says, has helped Bwik keep its operational costs low thus maximise profits.

Bwik Petroleum supplies fuel products to privately owned fuel stations countrywide, Bitumen to construction companies while the Heavy Fuel Oil to factories.

Future prospects
Birulu intends to boost sales by increasing the firm’s capitalisation in the short-term, expanding its product offers through establishing retail fuel stations and selling lubricants.

The establishment of fuel stations is in the medium-term and he seeks to widen the firm’s income in order to create a window of immunity to the current tough competition.

In the long-term, however, Bwik intends to venture into operating storage facilities for other petroleum companies.

The discovery of oil and gas in Uganda is also expected to greatly benefit players such as Bwik and the firm is positioning itself to tap into the opportunities.

fkulabako@ug.nationmedia.com

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