Capital Oil Vs Total Nigeria Plc: skewed in Total’s favour

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By Folakemi Emem-Akpan

Both companies operate in the downstream petroleum subsector of the Nigerian economy, with Total being much more popular than Capital Oil. For the 2017 financial year, Total also generated more revenue and had more profit than Capital Oil did. In terms of profitability ratios, Total also came out on top when their profitability ratios are examined side by side. Of the six profitability ratios examined, Total led in five while Capital Oil led in one (and only be default). Total led its peer in terms of turnover growth rate, return on assets, return on equity, pre tax profit margin and operating margin while Capital Oil led in terms of pre tax profit growth rate only.

Turnover growth rate

For the 2017 financial year, Total was unable to advance its gross earnings, such gross earnings declining slightly to N288.1billion from N290.9 billion in the preceding year. Analysis shows that this translates a decline rate of 1.0 per cent, as compared to Capital Oil’s much worse turnover decline rate of 43.9 per cent for the same period under review. Analysis shows that Total was the winner in this respect.

Pre-tax profit growth rate

A slightly different scenario from turnover growth rate was observable when it comes to pre tax profit growth rate. While Total also recorded a decline in its ability to make profit, Capital Oil at first seemed to record a betterment, making Capital Oil the winner in this respect. Total’s profit stood at N11.8 billion, 42.2 per cent less than the N20.4 billion recorded in the prior year. Meanwhile, Capital Oil recorded a pretax loss of N156.5 million, and because this loss was better than the loss of N336.9 million of 2016, our analysis shows that it recorded a pre tax profit growth rate rather than a decline for the period under review.

Profit margin

Of the two companies, Total was better able to translate its turnover to profit. For the 2017 financial year, pre-tax profit margin (which measures a company’s ability to squeeze as much profit as is possible from turnover) for Total was 4.1 per cent, higher and better than Capital Oil’s result. Capital Oil on the other hand had a loss margin of 33.1 per cent, meaning it made a loss of N33.10 on every N100 income earned, as compared with the N4.10 profit that Total made on every N100 income earned.

ROE and ROA

Working with shareholders’ funds valued at N28.2 billion, Total was able to record a return on equity of 28.4 per cent, down from 62.7 per cent recorded in the preceding year. This 28.4 per cent ROE is as compared to and better than Capital Oil’s loss on equity (rather than ROE) for 2017 which stood at 69.9 per cent.

Analysis shows that while every N100 worth of equity deployed by Capital Oil earned it N69.90 in after-tax loss, such N100 equity deployed earned Total a profit of N28.40, making Total the winner in this regard.

Return on assets followed a similar pattern, with Total recording a return and Capital Oil recording a loss. While Total had a return on assets of 10.9 per cent, Capital Oil had a loss on assets of 13.8 per cent.

Operating margin

For the 2017 financial year, Total recorded an operating margin of 7.3 per cent, and this was lower and better than the 35.5 per cent result that Capital Oil recorded for the period under review.

A point to consider

It is important to note that the 2017 financial year was not a good one for Capital Oil on so many levels and it seemed to be one of the companies hardest hit by Nigeria’s economic recession.

It is also important to note that while Total is much bigger than Capital Oil, a bigger company size is not necessarily a precursor of better profitability.

 

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