Total Energies: High Product Price, Demand Drives Profit

Kayode Tokede 

Total Energies Marketing Nigeria announced its first quarter (Q1) 2022 unaudited results for period ended March 31, 2022 with revenue gaining 46.3 per cent to N97.61 billion from N66.70 billion reported in Q1 2021. 

The growth in revenue reported by Total Energies Marketing Nigeria was driven by higher product prices and demand from consumers in the period three months of 2022.

The petroleum marketing company sustained dominance in the downstream oil & gas market as the growth in revenue was driven by the impressive growth across lubricants & others that gained 91.3 per cent in Q1 2022 and Petroleum products that rose by 34.1 per cent in Q1 2022. 

Revenue contribution from the lubricants & others line increased to 31per cent in Q1 2022 from 24 per cent reported in Q1 2021, highest level on record and highlighting management’s strategy of maximizing its lubes revenue growth. 

Across its business segments, revenue from the Network rose by 10.8 per cent and contributed 53 per cent of revenue), General Trade rose by 125.6 per cent and contributed 37 per centof revenue) and Aviation rose by 168.3per cent and contributed 11 per cent of revenue) segments all increased.

Net finance cost declined by 44.6 per cent to N7.64 million from N140.08 million in Q1 2021, following a surge in finance income to N684 million from N37.05 million in Q1 2021. 

On the other hand, finance costs increased by 330 per cent to N761.65 million, driven by interests on other loans from N515.32 million reported in Q1 2022.

 Overall, profit before tax surged by 50.6 per cent to N6.55 billion in Q1 2022 as against N4.35 billion reported in Q1 2021. 

Notwithstanding a higher tax expense of N2.19 billion in 2022 from N1.38 billion in Q1 2021, profit after tax grew by 47 per cent to N4.37 billion in Q1 2022 from N2.97 billion reported in Q1 2021.

Surge in Revenue Drive Profit

Hitherto, Total Energies Marketing Nigeria had reported Basic and diluted earnings per share (EPS) of N49.26 in 2021 from N6.08 in 2020 following a significant growth reported in revenue and decline in finance costs. 

Revenue increased by 66.7 per cent to N341.32 billion in 2021 from N204.72billion in 2020, owing to the increase in demand from consumers for the festive season, and Total Energies Marketing Nigeria’s volume drive in 2021 and higher product prices. 

Accordingly, substantial increases were recorded across the business segments that included petroleum products and lubricants, among others. 

The breakdown of revenue revealed that petroleum products gained 62.5 per cent to N255.19 billion in 2021 from N157.05 billion in 2020, while revenue generated from lubricants and other rose significantly by 81 per cent to N86.13 billion in 2021 from N47.67 billion in 2020.

The National Bureau of Statistics (NBS) had revealed that the average price paid by consumers for Premium Motor Spirit (PMS) also called petrol increased by 0.04 per cent on year-on-year basis to N165.77 in December 2021 when compared to N165.70 valued in December 2020.

The bureau also revealed that the average price for refilling a 5kg cylinder of liquefied petroleum gas (Cooking Gas) on year-on-year analysis increased from N1949.75 in December 2020 to N3,594.81 in December 2021 showing an increase of 84.37 per cent.

Average Retail Price

According to NBS report: “The average retail price of Automotive Gas Oil (Diesel) paid by consumers increased by 28.97per cent on a year-on-year basis from a lower cost of N224.37 per litre recorded in the corresponding month of last year to a higher cost of N289.37 per litre in December 2021.”

However, from Total Energies Marketing Nigeria ‘s profit & loss figures, the petroleum marketing company, thus reported N286.32 billion cost of sales in 2021, an increase of 65 per cent from N173.97 billion reported in 2020.

The interplay between revenue and cost of sales positioned gross profit by N55 billion in 2021, representing 79 per cent from N30.75 billion reported in 2020.

Gross margin (-377bps) declined to 14.6per cent as the uptick in crude oil prices (Average Brent price: $79.66/bbl in Q4-2021 as against $45.26/bbl in Q4 2020) led to a faster increase in the cost of sales of about 95 per cent higher than revenue.

Total Energies Marketing Nigeria ‘s Non-core income closed 2021 at N4.48 billion, representing an increase of 330.61 per cent from N1.04 billion reported in 2020.

The company reported N33.4 billion total operating expenses in 2021, an increase of 19.2 per cent from N28.02 billion reported in 2020. The breakdown revealed that selling and distribution expenses rose by 9.06 per cent to N3.23 billion in 2021 from N2.96 billion in 2020, while administrative expenses rose by 19.15 per cent to N30.16 billion in 2021 from N25.05 billion in 2020. 

In trims of finance, the petroleum marketing company reported 62 per cent drop in finance income to N841.04 million in 2021 from N2.26 billion in 2020. Finance cost also dropped by 39per cent to N1.77 billion in 2021 from N2.9 billion in 2020.

It brings net finance cost to N938.6 million in 2021, a growth of 49per cent from N629.18 million reported in 2020 over surge in finance costs. 

Overall, the company recorded a profit before tax of N24.8 billion in the period as against N2.91 billion reported in 2020. A N7.9 billion tax expense resulted in profit after tax of N16.86 billion in the period under review as against N2.06 billion reported in prior full year results.

Analysts View

According to analysts at Cordros security, Total Energies’s performance is laudable as the company’s earnings showed strong resilience, majorly driven by its strong volume play in 2021 financial year. 

They added, “Also, we like that the company sustained its drive to lower finance costs which was a major drag on earnings in the pre-pandemic era.  However, we highlight that the decline in margins may be a recurrent theme going forward, following the reinstatement of the PMS price cap and cost pressures owing to the uptick in crude oil prices. We await the release of the audited results for a dividend declaration. Our estimates are under review.”