Fesco pushes on with new station as FesGas promotion dampens Q3
Published:Wednesday | February 28, 2024 | 12:07 AM
Construction of a new company-owned petroleum station, to be known as Fesco Oval, starts in May, which will push the petroleum marketing company’s network to 22 locations.
Having recently got planning approvals to proceed, Future Energy Source Company CEO Jeremy Barnes says the company will be spending just over $500 million on development of the multi-purpose facility that should be ready for commissioning by July 2025.
The 1.2-acre property that will become the Fesco station’s home lies in the middle of the Spanish Town Road industrial estate, and along a three-mile stretch that also features a rival TotalEnergies gas station. In addition to the usual petroleum products, the location will include a drive-through quick service restaurant, an LPG supply depot and a convenience store. Additionally, there will be a fully lit six-a-side football field and a fully equipped homework centre with free Wi-Fi to be built as part of a programme of social support for the nearby Waterhouse community. The location will also carry some of the company’s administrative offices to accommodate the fast-growing staff.
“Right now, the company has grown a lot,” said Barnes.
“We moved from seven employees to about 130 now. By the time we’re done at Fesco Oval we’ll be having more than 200 people on staff. We need somewhere to house them,” Barnes told the Financial Gleaner.
The Spanish Town Road location will join Beechwood Avenue as the second company-owned and run service station. The others are dealer-operated.
The new station is coming on the heels of other moves from Fesco, most recently its entry into the LPG market via acquisition of WilsonBeck, now known as FesGas.
The company has since spent “a lot more on advertising” and marketing, according to Barnes.
This put a damper on profits as Fesco spent $14 million on advertising during the third quarter ending December 2023, nearly doubling the $8.43 million spent in the comparative 2022 period.
“So despite the big increases in revenues and gross profit, there was a slight decrease in net profits since we spent that much more on advertising and marketing the LPG business. Apart from being capital-intensive, there is a need to build brand awareness,” Barnes said.
Net profit for the quarter dipped nearly three per cent to $149.25 million, while revenue fell by 13 per cent to $7.59 billion.
Barnes says in addition to the gas station network and buildout of the LPG business, the company is moving to become the authorised distributor of Castrol motor oils for Jamaica. The Castrol motor oils and lubricants are a big brand in global motoring but has had a rough passage in the Jamaican marketplace given that there has been no key distributor for many years. Now, with Fesco taking the Castrol brand the company will have to settle positioning of the products since they may compete with Futroil, the proprietary brand offered by Fesco.
“It’s really two different price points. Castrol is adding another dimension to our oil business since they offer more synthetics and the products are positioned in the premium segment,” Barnes said.