Total Nigeria: Weak performance amid dividend payout to shareholders

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By Kayode Tokede

Total Nigeria Plc has reported one of its poorest performances in 2017 over weak revenue and increased cost of sales, leading to decline in profits and key financial ratios.

The management despite the weak performance in profit & loss figures announced a final dividend of N14.00 per 50 kobo ordinary share as against final dividend of N7.00 per share that paid in 2016.

In all, the total dividend paid to shareholders in 2017 financial year stood at N17.00 per 50 kobo ordinary share, the second year the management will be paying the same amount to shareholders.

Total Nigeria joined Nigerian Breweries to release financial year ended December 31, 2017, result and accounts as the management maintained strong corporate governance and adhere to Nigerian Stock Exchange (NSE) rules on results announcement.

The operational report of the downstream company for 2017 showed weak performance in revenue, followed by increased finance cost that eventually dragged the company’s profit downward.

Despite the Federal Govern-ment 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, the company struggled to grow its sales to service stations and sales to customers in the aviation industry.

Total Nigeria reported a drop of one per cent in revenue to N288.06 billion in 2017 from N290.95 billion reported in 2016.

Sales to service stations dropped by 1.11 per cent to N213.7 billion from N216 billion in 2016 while Sales to corporate customers excluding customers in the aviation industry gained 21.5 per cent from N47.4 billion in 2016 to N57.5 billion in 2017.

Sales to customers in the aviation industry significantly dropped by 38.76 per cent to N16.8 billion as against N27 billion reported in 2016.

In addition, the company sold N240.56 billion Petroleum products in 2017 from N251.99 billion reported in 2016 while revenue generated from Lubricants, others gained 21.9 per cent to N47.5 billion from N38.97 billion in 2016.

The company benefited N1.87 billion on Petroleum Subsidy Fund (PSF) though spent heavily on Interest on bank overdrafts and loans that amounted to N3.06 billion in 2017.

Total assets also dropped over Inventories and Trade and other receivables decline in the year under review.

The balance sheet position of the company remained stronger with better financial structure and improved liquidity.

The management has shown commitment to sale of its Liquefied Petroleum Gas (LPG) assets worth N117.7 million.

The external auditor, KPMG challenged the management judgment on the classification of the LPG assets as held for sale in line with the applicable standard.

Finance position

Total Nigeria total assets dropped by 21 per cent from N136.9 billion to N107.98 billion in 2017.

Long-term assets rose by 18 per cent from N30.2 billion in 2016 to N35.7 billion while current assets dropped by 32per cent to N72.2 billion from N106.8 billion recorded in 2016.

Total liabilities also dropped by 30per cent to N79.8 billion compared with N113.4 billion in 2016.

Long-term liabilities closed 2017 at N2.8 billion from N245 million while current liabilities dropped by 32 per cent to N76.9 billion from N113 billion reported in 2016.

Total equity thus gained 20 per cent from N23.57 billion to N28 billion driven by increase in retained earnings to N28.1 billion in 2017.

The proportion of equity funds to total assets, however, moved from 17.2per cent to 26 per cent while Total Liabilities/Total Assets dropped from 82.7per cent to 73.9 per cent.

Decline in revenue, profits

Despite the increase in PMS by FG, Total Nigeria has recorded marginal decline in revenue that impacted negatively on profits.

The company’s Cost of Sales (COS) recorded a growth of seven per cent to N258.77 billion from N241.85 billion reported in 2016 to drag gross profit to N29.3 billion in 2017 from N49.1 billion in 2016, a decline of about 40.3 per cent.

This brings about 84.3 per cent proportion of COS to revenue in 2017 financial year to 89.8 per cent from 83.1 per cent in 2016.

Other business income recorded grew significantly to N3.9 billion from N1.45 billion in 2016.

Total operating expenses stood at N20.96 billion in 2017, a growth of 1.9 per cent from N20.56 billion recorded in 2016.

The breakdown of Total Nigeria operating expenses include  Selling & distribution costs that moved  from N4.7 billion to N2.7  billion in  2016 while administrative expenses increased to N18billion from N15.8 billion in 2016.

Operating profit dropped by 41.4 per cent to N12.3 billion from N20.93 billion reported in 2016.

Amid macro economic challenges that include Naira devaluation, Total Nigeria finance cost moved from N851 million to N3.06 billion in 2017.

The company’s profit before tax dropped by 42 per cent to N11.78 billion in 2017 as against N20.35 billion in 2016.

Total Nigeria tax income dropped by 32 per cent to N3.8 billion from N5.56 billion reported in 2016 to position 45.8 per cent decline in profit after tax to N8.02 billion in 2017 from N14.8 billion in 2016.

Earnings per shares took a nod with a drop of 45.8 per cent from N44.00 to N23.62 in 2016.

The underlying fundamental of the company dropped in the year under review.

Gross profit margin moved from 16.9 per cent to 10.2per cent while profit margin decreased from seven per cent to 4.1per cent in 2017.

Return on asset rose from 14.9 per cent to 10.9 per cent while return on equity stood 28.4 per cent as against 62.8 per cent in 2016.

Conclusion

The management of Total Nigeria needs to strengthen its revenue generation despite series of challenging petroleum marketing companies in the country are facing. Recent reforms in the Oil and gas sectors is expected to stimulate the company’s revenue growth by next year while increasingly efficient cost management in operating expenses reduction strategy should be providing additional impetus.

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

Nigerian NewsDirect urged the management to remain focused on retail outlets and justify investors’ confidence with higher earnings and dividend yields by the end of 2018 financial year.

 

 

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