Imperial Oil Ltd. :IMO-US: Earnings Analysis: Q2, 2017 By the Numbers : August 7, 2017

Imperial Oil Ltd. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Imperial Oil Ltd. – Cenovus Energy Inc., Suncor Energy Inc., Canadian Natural Resources Limited, Exxon Mobil Corporation, Royal Dutch Shell Plc Sponsored ADR Class A, Athabasca Oil Corporation and Pembina Pipeline Corporation (CVE-US, SU-US, CNQ-US, XOM-US, RDS.A-US, ATH-CA and PBA-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 4,881.66 million, Net Earnings of USD -57.27 million.
  • Gross margins widened from 0.17% to 0.69% compared to the same period last year, operating (EBITDA) margins now 2.99% from 2.58%.
  • Year-on-year change in operating cash flow of 4.54% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 4881.66 4959.77 4997.89 4702.57 4506.96
Revenue Growth (%YOY) 8.31 42.37 14.77 -8.1 -19.51
Earnings (mil) -57.27 251.62 1082.16 768.94 -140.41
Earnings Growth (%YOY) 59.21 442.24 1316.7 110.04 -243.88
Net Margin (%) -1.17 5.07 21.65 16.35 -3.12
EPS -0.07 0.29 1.27 0.9 -0.16
Return on Equity (%) -0.3 1.34 5.86 4.27 -0.78
Return on Assets (%) -0.73 3.24 13.72 9.42 -1.68

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Market Share Versus Profits

Revenues History
Earnings History

IMO-US‘s change in revenue this period compared to the same period last year of 8.31% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that IMO-US is holding onto its market share. Also, for comparison purposes, revenues changed by -1.57% and earnings by -122.76% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 0.17% to 0.69% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 2.58% to 2.99% compared to the same period last year. For comparison, gross margins were 6.73% and EBITDA margins were 9.57% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

IMO-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 8.83, compared to last year’s level of -22.98 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

IMO-US‘s change in operating cash flow of 4.54% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -4.42% to -2.38% and (2) one-time items. The company’s pretax margins are now -1.90% compared to -4.34% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Imperial Oil Ltd. is an integrated oil company, which engages in the exploration, production and sale of crude oil and natural gas in Canada. It also petroleum refiner, producer and marketer of petroleum products. The company operates its business through following segments: Upstream, Downstream and Chemical. The Upstream segment includes the exploration and production of crude oil, natural gas, synthetic oil and bitumen. The Downstream segment operations consist of the transportation and refining of crude oil, blending of refined products and the distribution and marketing of those products. The Chemical segment is organized and operates to manufacture and marketing of various petrochemicals. Imperial Oil was founded on September 8, 1880 and is headquartered in Calgary, Canada.

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