Total Nigeria:  Investors’ dividend sustained despite drop in profit

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Total Nigeria Plc maintained its dividend payment to shareholders amid drop in profitability and marginal increase in revenue.

The multinational petroleum marketing company balance sheets was on a decline performance leading to N3.2 billion negative working capital.

The balance sheet position of the company still emerged stronger with better finance structure and improved liquidity. Total assets dropped by five per cent, underlying eight per cent drop in current assets while equity funds added 11 per cent to close in unaudited result and accounts for nine months ended September 30, 2017 at N26.13 billion.

The operational report of the downstream company for the nine months ended September 30, 2017 also showed significant growth in finance cost, followed by effective cost management in non-core business related transactions.

Despite Federal Government increase in the pump price of Premium Motor Spirit (PMS) to N145 from N86 in order to ensure adequate sustenance of the present improvement in PMS supply across the country, Total Nigeria’s reported 0.4 per cent increase in revenue as  revenue from petroleum products dropped by 3.5 per cent.

Before now, Total Nigeria has benefited from stable petroleum products across the country as revenue early in the year improved profit year-on-year.

With severe macro economic challenges facing the nation, Total Nigeria finance cost and total operating expenses increased significantly as the management battled cost of doing businesses.

On the heels of drop in profit, the management of Total Nigeria had proposed a dividend of N3 per share, the only petroleum marketing company to do so this year and it was paid to shareholders on December 18, 2017.

The share price of Total Nigeria this year has appreciated to N335 per share but closed on December 22, 2017 at N219 per share.

 

Finance position

Total Nigeria’s total assets in nine months dropped by five per cent to N130 billion from N136.9 billion reported in 2016 full year result.

Long-term assets added six per cent to N32.1 billion in nine months of September 30, 2017 from N30.2 billion while current assets dropped by eight per cent to close the months under review at N98.26 billion from N106.7 billion in 2016.

Total liabilities also dropped by eight per cent to N104 billion from N113 billion, driven by growth in Deferred tax liabilities and Trade & other payables and borrowing.

Long-term liabilities rose significantly to N2.7 billion from N245 million in 2016 as current liabilities dropped by 10 per cent from N113 billion in 2016 to N101.46 billion in nine months of 2017.

Total equity thus increased in retained earnings to N 26 billion from N23.5 billion while working capital closed at negative N3.2 billion in nine months ended September 30, 2017 as against negative N6.3 billion in 2016.

The proportion of equity funds to total assets, however, moved from 17.2per cent to 20.1 per cent in nine months ended September 30, 2017.

 

Drop in revenue impacted on profits

Amid increase in PMS by FG, Total Nigeria reported 0.4 per cent increase in revenue to N221.2 billion from N220 billion reported in nine months of 2016.  Cost of Sales (COS) increased by 5.5 per cent to N198.6 billion from N188.2 billion

Consequently, gross profit dropped by 29.4per cent from N32 billion to N22.6 billion in nine months of 2017.

Other business income recorded a significant increase of about 312.8 per cent to N3.2 billion from N814.6 million reported in nine months ended September 30, 2016.

Total operating expenses stood at N16.3 billion in nine months of 2017 from N15.6 billion recorded in nine months of 2016.

The breakdown of Total Nigeria operating expenses include selling & distribution costs that moved  from N3.96 billion to N2.8 billion while administrative expenses rose by 16per cent to N13,5 billion from N11.6 billion recorded in nine months ended September 30, 2017.

Marginal increase in revenue and increase in total operating expenses thrust Total Nigeria operating profit by a drop of 44.2 per cent from N17 billion to N9.6 billion.

Amid macro economic challenges that include Naira devaluation, Total Nigeria finance cost increased by 328.4 per cent from N509 million to N2.18 billion in nine months of 2017.

Profit before tax dropped by 43.1 per cent from N17 billion to N9.7 billion in nine months of 2017.

With about 30,7 per cent drop in tax expenses from N5.37 billion to N3.7 billion, profit after tax stood at N5.96 billion in months under consideration, 48.8 per cent below N11.6 billion recorded in the erstwhile nine months unaudited results.

Earnings per shares take a nod with a drop of 48.8 per cent from N34.26 to N17.54 in nine months of 2017. .

The underlying fundamental of the company remained stronger in key financial parameters.

Gross profit margin moved from 85.5 per cent to 89.8per cent while profit margin decreased from 2.4 per cent to 1.7 per cent in nine months of 2016.

Return on asset slipped from 3.4 per cent to 2.4 per cent while return on equity stood 22.8 per cent as against 49.4 per cent in nine months of 2016.

 

Conclusion

The performance of Total Nigeria is commendable despite series of challenging petroleum marketing companies in the country are facing.

Recent reforms in the Oil and gas sectors have continued to stimulate the revenue growth while increasingly efficient cost management in operating expenses reduction strategy appeared to be providing additional impetus.

Stronger balance sheet with attendant reduction in finance charges, had removed a major snag that had undermined the overall investors’ return outlook.

Stable pricing of PMS among other petroleum products should drive aggressive revenue growth and provide impetus for future growth of Total Nigeria.

Nigerian NewsDirect urges the management to remain focused on retail outlets and justify investors’ confidence with higher earnings by the end of 2017 finance year.

The management needs to grow its sales in Nigeria and improve on its trade recovery from key distributors’ outlets across the country.

The company last year had affiliation with 29 new stations, several stations reopened after reconstruction; 200th station under the new T-Air image were also completed.

For optimization of depots and plants, Total Nigeria also announced last year of completing LPG sphere upgrade in Apapa, including all invariants, finishing the construction of a new ATK tank in Apapa and a new high speed filling machine being installed at the Lagos Blending Plant to enhance efficiency and increase lubricants production.

 

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