STO Reports Record Net Profit in 2023 Amid Revenue Challenges

The State Trading Organization Plc. (STO) has disclosed its financial results for 2023, announcing a record net profit of MVR 1.09 billion. This figure represents a slight increase from the MVR 1.07 billion reported in 2022, marking a 1.3% rise and the highest net profit in the organization's history.
Despite achieving record net profits, STO faced a decline in total revenue, which fell to MVR 17.1 billion in 2023 from MVR 19.1 billion in the previous year. This decrease of MVR 1.99 billion was primarily driven by reduced revenue from the fuel segment and the cessation of the fishery segment. Revenue from the fuel segment dropped from MVR 13.4 billion in 2022 to MVR 13 billion in 2023 due to fluctuations in international fuel prices. The discontinuation of the fishery segment contributed to a revenue loss of MVR 1.6 billion.
However, there were positive developments in other segments. The shipping segment experienced a notable revenue increase, climbing from MVR 308 million in 2022 to MVR 376 million in 2023, marking a 22% growth attributed to successful market penetration. The gas segment also saw revenue growth, rising by 13% from MVR 223 million to MVR 252 million, benefiting from lower international gas prices. Similarly, the insurance services segment reported a 19% revenue increase, growing from MVR 436 million to MVR 519 million. In contrast, the trading segment recorded a 4% revenue decline, falling from MVR 3.04 billion to MVR 2.9 billion, impacted by weaker performance in sub-segments such as construction and PCs.
Despite the revenue challenges, STO achieved a record gross profit of MVR 3.5 billion in 2023, up from MVR 2.7 billion in 2022, marking a significant 30% increase. This impressive performance was attributed to effective cost management, strategic planning, improved supplier negotiations, and enhanced cost of sales efficiencies.
STO acknowledged facing significant challenges with net finance costs, which rose by 19.7% compared to the previous year. This increase was primarily due to higher receivables from State-Owned Enterprises (SOEs), necessitating extended payment terms to suppliers and increased reliance on financing facilities. Global economic conditions, including inflation and rising interest rates, further impacted these finance costs. Despite these challenges, STO managed to mitigate some of the increased costs through strategic investments and effective financial management, ensuring operational stability.
The organization maintained a strong asset base, reporting total assets of MVR 13.9 billion in 2023, slightly up from MVR 13.8 billion in 2022. Despite the transfer of MIFCO, which reduced property, plant, and equipment by MVR 383 million, this was offset by acquisitions of additional land aimed at converting non-performing assets into more lucrative investments. Trade and other receivables increased by 16% to MVR 5.2 billion, primarily due to higher receivables from SOEs. The cash and equivalents balance improved to MVR 1.7 billion at the end of 2023, up from MVR 1.4 billion in the previous year.
Operating cash flow saw a substantial improvement, soaring from MVR 141 million in 2022 to MVR 1.7 billion in 2023. This increase was driven by cash profits from continuing operations and the impact of MIFCO. Positive cash flow from investing activities amounted to MVR 2.8 million, compared to a negative MVR 1.6 million in 2022, primarily influenced by MVR 917 million from the MIFCO transfer. Cash outflows from financing activities totaled MVR 741 million in 2023, compared to a gain of MVR 1.5 billion in 2022. Consequently, STO reported net cash and cash equivalents of MVR 1.6 billion for the year.
STO's liquidity position strengthened significantly, with working capital increasing from MVR 482 million to MVR 1.6 billion in 2023, bolstered by the transfer of MIFCO. Despite extending payment terms to suppliers due to increased SOE receivables, trade and other payables rose to MVR 3.7 billion in 2023. However, the settlement of bonds and early loan repayments reduced loans and borrowings by MVR 775 million to MVR 3.8 billion.