Finance, Sales Cost Plods Totalenergies Profit

Kayode Tokede

Totalenergies Marketing Nigeria Plc reported about seven per cent drop in profit to N12.05 billion in nine months ended September 30, 2022   unaudited result and accounts from N13.4 billion reported in corresponding nine months of 2021 over hike in cost of sales and finance cost.

The petroleum marketing company also reported about five per cent decline in profit before tax to N18.78billion in nine months of 2022 as against N19.72billion reported in nine months of 2021.

Nonetheless, the board and management of Totalenergies Marketing Nigeria proposed an interim dividend of N4.00 per share.

With the drop in profits, the company report a Profit Before Tax margin to 5.6per cent in nine months of 2022 from 8.1 per cent in nine months of 2021 while profit After Margin closed nine months of 2022 at 3.7per cent from 5.5 per cent in nine months of 2021.

Totalenergies Marketing Nigeria’s 2021 exceptional profit growth of the company was driven by a strong growth in sales revenue combined with a considerable cost savings. This year so far, the strength in revenue has been retained but the cost-saving advantage has been lost – which slashed margins and clogged the flow of revenue into the bottom line.

In the period under review, the company announced 45 per cent increase in cost of sales to N292.53billion from N201.64billion reported in corresponding period as finance cost rose significantly by 161.9 per cent to N3.34billion in nine months of 2022 from N1.27billion reported in nine months of 2021.

The growth in finance cost was driven by N1.95billion interest paid on import loans in nine months of 2022 from N33.28billion reported in nine months of 2021, while Interest on other loans moved to N1.31billion in nine months of 2022 from N911.5million reported in 2021.

Rising finance expenses reflect an increasing debt pile up from N15 billion at the end of last year to N57.5 billion at half year and jumping further to almost N107 billion at the end of nine months of 2022.

The combination of cost of sales and total operating expenses (Selling & distribution and Administrative expenses), thus, positioned Totalenergies Marketing Nigeria’s overall expenses to N319.29billion in nine months of 2022, representing an increase of 42 per cent from N225.11billion reported in nine months of 2021.

This brings it OPEX margin to -7.9per cent in nine months of 2022 from -9.7per cent in nine months of 2021.

The company benefited from its products price increase in 2022 as revenue rose by 39per cent to N397.19 billion in nine months of 2022 from N242.22billion reported in nine months of 2021.

Revenue breakdown disclosed a N245.57billion sales from Petroleum products in the period under review from N180.7billion in corresponding period as revenue from Lubricants and others hit N91.61billion in nine months of 2022 from N61.53billion reported in nine months of 2021. 

Revenue growth followed the stellar performances across the business’ three segments – Network that rose by 29.6per cent, contributing 44.1 per cent to revenue; General Trade rose by 38.6 per cent and contribute 41.3per cent of revenue and Aviation rose significantly by 106.3per cent and contributed about 15 per cent of revenue.

Gross profit margin contracted to 13.24per cent in nine months of 2022 as against 16.6per cent in nine months of 2021, due to a faster growth in cost of sales (49.5per cent) relative to revenue.

As non-core business income dropped to N2.65billion in nine months of 2022 from N3.65billion in nine months of 2021, operating profit moved to N20.68billion in nine months of 2022, representing an increase of 0.15per cent from N20.65billion reported in nine months of 2021.

The company earned N36.83 per share at the end of the nine months of 2022, down from N39.43 per share in the same period in 2021.

Mounting Loans/borrowings

Totalenergies Marketing Nigeria reported N314.05billion total assets as of September 30, 2022, representing an increase of 50.5 per cent from N208.73billion in 2021 Financial Year (FY).

The company in the period saw its loans increasing to N106.9billion as of September 30, 2022 from N15.12billion in 2021FY.

The breakdown of the company’s loans/borrowings revealed N47.4billion short term intercompany loan in 2022 from N7.69billion in 2021, while trade finance loan increased to N59.48billion in nine months of 2022 from N7.43billion in 2021 FY.

Total current liabilities rose by 62 per cent to N258.1billion in nine months of 2022 from N159.4billion in 2021 as total liabilities closed nine months of 2022 at N266.01billion, representing an increase of 59per cent from N167.11billion reported in 2021 FY.

Conclusion

According to analysts at Cordros Research, “Totalenergies Marketing Nigeria’s result highlights the significant headwinds in the downstream oil and gas space and the overall operating landscape which have remained inhibiting factors to petroleum marketers.

“We expect Total to see out the year with the resilient momentum the company has exhibited so far in 2022, with festive induced travelling in Q4 adding an extra layer of support to sales. However, we maintain our view that the volatility of crude oil prices will remain a strong headwind to the company’s operations.”