A Quarter That Changes the Company’s Scale

Regency Petroleum Company Limited (RPL) entered 2026 as a materially different business from the one that closed 2025. The mid-February acquisition of Yaad Man Haulage (JA) Limited’s LPG operations — completed for a total consideration that generated J$171.08 million in goodwill above net asset value — effectively quadrupled the company’s gas cylinder base from approximately 20,000 to more than 70,000 units. With it came the Malvern, St. Elizabeth filling plant, the existing Western Jamaica distribution network, and several key supporting assets.

The numbers that came with it in Q1 are striking. Revenue for the three months ended March 31, 2026 reached J$662.78 million — a 53% advance on the J$434.13 million recorded in Q1 2025. Operating profit more than doubled, rising 101% from J$24.01 million to J$48.34 million. Net profit grew 76% from J$15.08 million to J$26.53 million. Earnings per share moved from $0.011 to $0.018.

It is important to note, as management does explicitly, that Yaad Man only contributed approximately 6% of Q1 revenue — having been part of the business for only six weeks of the quarter. The organic fuel retail business — service stations in Westmoreland and on Spanish Town Road — delivered the bulk of the growth, with Westmoreland benefiting from continued recovery from Hurricane Melissa. The full financial impact of the Yaad Man integration will emerge through Q2, Q3 and Q4 of FY2026.

Revenue and Gross Profit: Volume Drives the Top Line

The 53% revenue surge reflects both volume growth and price effects. Petrojam ex-refinery prices for 87 Octane, 90 Octane and Auto Diesel were all higher in March 2026 than in March 2025 — with 87 Octane at J$167.88 per litre versus J$152.64, a 10% increase. But management is clear that RPL cannot control market prices and instead directs attention toward volumes. The volume performance across Westmoreland — a market recovering from Hurricane Melissa disruption — and the Spanish Town Road location, which is becoming more established in its surrounding community, drove the organic revenue growth.

Gross profit grew a more modest 36% to J$96.82 million, as gross margin compressed from 16.41% in Q1 2025 to 14.61% in Q1 2026. Management attributes this to two factors: higher prices from suppliers (which cannot immediately be passed through in full), and a change in the composition of products sold — the LPG business, which carries different margin characteristics from retail fuel, is now a more significant part of the mix. This margin compression deserves monitoring. If RPL’s LPG expansion dilutes blended margin further, the gross profit growth rate will lag revenue growth even as volumes accelerate.

Finance Costs: The Acquisition’s Price Tag on the Income Statement

The most significant income statement development below the gross profit line is the explosion in finance costs — from J$8.93 million in Q1 2025 to J$21.81 million in Q1 2026, a 144% increase. This is almost entirely attributable to the CIBC Caribbean (Jamaica) Limited financing arranged to support the Yaad Man acquisition and the simultaneous retirement of the company’s existing US Dollar bond.

The J$7.23 million commitment fee is a one-time charge — it will not appear in Q2 or subsequent quarters. This is the single most important normalisation an investor must make when assessing RPL’s run-rate profitability. Stripping out the commitment fee, Q1 finance costs would have been approximately J$14.58 million — still up 63% year-over-year from the recurring debt cost increases, but materially less alarming as a trajectory indicator.

The two CIBC loans — one to refinance the US Dollar bond and one to fund the Yaad Man acquisition (J$150 million) — are repayable over six to eight years at a fixed rate of 8.70% for three years before converting to floating. The total long-term borrowings on the balance sheet at period end stood at J$668.56 million, compared to nil a year earlier. This is the leverage that funded the company’s transformation, and its cost must now be serviced from operating cash flows.

Operating Expenses: Largely Contained With Notable Movements

Total operating expenses of J$50.38 million represented a 6% increase from J$47.52 million in Q1 2025. Management notes this is a normalisation following several years of new service station openings. The expense breakdown reveals several meaningful movements within the overall stability.

Staff costs fell to J$10.71 million from J$13.52 million — a J$2.81 million reduction — attributed to disruption at the Crawford filling station, a comparatively lower headcount, and a shorter payment period versus Q1 2025. Insurance charges rose sharply as the company actively manages its risk profile following the Hurricane Melissa experience. Depreciation increased to J$13.45 million from J$9.80 million, reflecting the PP&E additions from the Yaad Man acquisition and right-of-use asset depreciation rising to J$3.96 million from J$2.81 million as the lease portfolio grows with network expansion.

An expected credit loss (ECL) charge of J$2.25 million appeared for the first time — nil in Q1 2025. Management contextualises this appropriately: as the LPG business scales, trade receivables grow, and IFRS 9 requires ECL provisioning against those balances. The charge reverses when customers pay. Monitoring the ECL trajectory against receivables growth will be important as the Yaad Man distribution network comes fully onto the books.

Balance Sheet: A J$1.78 Billion Asset Base, Reshaped by Acquisition

Total assets grew 74% year-over-year to J$1.784 billion from J$1.025 billion — driven primarily by three acquisition-related additions. Property, plant and equipment increased from J$480.85 million to J$809.56 million, with J$284.88 million in Q1 additions representing the Yaad Man physical assets (motor vehicles, gas cylinders, filling plant and site offices). Goodwill of J$171.08 million, representing the premium paid above Yaad Man’s net asset value for intangibles including customer relationships and the distribution network, was recognised for the first time. Deferred expenditure of J$210.55 million — principally representing the CIBC loan commitment fees and related financing costs being amortised — also grew significantly.

The gas cylinder expansion is particularly notable in the PP&E detail. Additions to gas cylinders in Q1 alone totalled J$148.99 million, bringing the gross cylinder asset base to J$419.02 million. The net book value of cylinders after accumulated depreciation stands at J$326.22 million — by far the single largest PP&E category, representing 40.3% of total PP&E net book value. This is the operational heartbeat of the LPG business.

Cash closed at J$9.80 million — down from J$15.87 million at year-end, reflecting the cash demands of the acquisition and integration period. Net cash used in investing activities was J$455.95 million, comprising PP&E additions (J$284.88 million) and the goodwill payment (J$171.08 million). This was funded almost entirely by the new CIBC long-term loan drawdown of J$479.51 million. Operating activities consumed J$29.47 million in net cash, driven by working capital build in receivables and inventory as the business scales.

Outstanding Issues: Insurance, Crawford, and Fuel Price Risk

Three unresolved items carry material value implications for RPL in the quarters ahead. The first is the J$55.38 million insurance receivable from the general insurer related to Hurricane Melissa damage. This balance has been sitting on the books and management continues to await payment. For a company with J$9.80 million in cash, the collection of this receivable would meaningfully improve liquidity.

The second is the Crawford, St. Elizabeth filling plant — the LPG location destroyed by Hurricane Melissa. Electricity has been recently restored to the surrounding area, but lines to the location remain unconnected. This has delayed the site’s return to service. With electrical work now underway by the relevant authorities, management is cautiously optimistic about reopening, but no firm date is given. Crawford represents lost operating capacity and revenue that is not reflected in Q1 results.

Fuel Price Risk — Middle East Geopolitics

Ex-refinery prices from Petrojam have risen 18–26% since February 26 due to Middle East geopolitical tensions. The Minister for Energy has signalled potential adjustment to Petrojam’s pricing mechanism. RPL has not observed volume reduction yet, but management acknowledges that sustained high prices could reduce commuter activity and volumes. The company’s gold and platinum card loyalty programme is its primary demand retention tool in a high-price environment.

The third is the broader fuel pricing environment. Rising Petrojam prices compress margins when RPL cannot pass them through immediately — a dynamic already visible in the Q1 gross margin decline from 16.41% to 14.61%. If the government adjusts the pricing mechanism as the Energy Minister has suggested, this could either ease or intensify the margin pressure depending on the direction of the adjustment.

Pipeline: Four Projects in Various Stages

RPL’s operational pipeline entering Q2 2026 includes four distinct projects at different stages of development. The Norman Manley International Airport service station has received NRCA environmental permit and planning permission; equipment is in place and site clearing is imminent. The station will be franchisee-operated, with the franchisee funding the fit-out — meaning RPL carries minimal capital risk on this development while gaining the branded fuel supply relationship.

The Crawford truck stop in St. Elizabeth is expected to open within 60 days of the report date, with the partner completing final activities. This will be RPL-branded and receive fuel supply from the company. The Crawford LPG filling plant remains out of service pending electricity reconnection. And the Quality Pavement Repair (QPR) pothole filler initiative — a diversification partnership with D&O Technologies LLC — is awaiting manufacturing equipment to begin local production.

Market Performance and Capital Markets

RPL’s share price appreciated 11% during Q1, rising from J$4.07 to J$4.52 at quarter close, with a peak of J$5.08 on March 6. Market capitalisation at quarter close stood at J$6.49 billion on 1,435,786,770 issued shares. The stock’s peak represented a price-to-earnings multiple well above the annualised run-rate earnings at that point — investors appear to be pricing the Yaad Man integration uplift into the forward multiple. The company’s AGM is scheduled for June 8 at the Jamaica Pegasus Hotel.