Total Nigeria full year scorecard disappoints

by Iheanyi Nwachukwu

March 1, 2018 | 1:08 am
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Despite that the board of directors of Total Nigeria Plc proposed a final dividend of N14 per share in its 2017 audited results; the company will still need to prove to shareholders that it will show greater strength in profitability at the end of year 2018. 

In the full year to December 31, 2017, Total Nigeria Plc reported decline across top-to-bottom line figures as shown in the result submitted at the Nigerian Stock Exchange (NSE). The proposed final dividend takes the company’s total dividend for the year to N17.

Total Nigeria Plc revenue in the period under review dropped by 1percent to N288.063billion, down from N290.953billion in 2016. The company also showed negative growth of 52.6 percent in earnings before interest, tax, depreciation and amortization (EBITDA), against a high of 256.9percent in the preceding financial year 2016.

While selling and distribution expenses decreased by 29percent to N2.719billion from N4.716billion in 2016, the company reported 16 percent increase in administrative expenses to N18.244billion, from N15.848billion in 2016. Operating profit declined to N8.333billion from a high of N28.538billion in 2016 financial year.

Also, Total Nigeria Plc reported gross income declined to N29.296billion from N49.102billion in 2016, down by 40.3percent.  Profit Before Tax (PBT) of N11.795billion represents 42percent decline from N20.353billion in 2016.  Finance costs rose remarkably to N3.064billion from N852million in 2016.

Profit After Tax (PAT) decreased by 45.8percent to N8.019billion from N14.797billion in 2016 financial year. This dismal outing shown by the company no doubt will be topical at its forthcoming Annual General Meeting (AGM) on June 21.

Return on Average Equity (RoAE) decreased from a high of 74.3percent in 2016 to 31percent in 2017. The reported 45.8percent year-on-year (y/y) drop in full year 2017 profit after tax translates to earnings per share (EPS) of N23.62 from a high of N43.58 in 2016.

Amid these results, Tominiyi Ramon’s team of equity analyst at Lagos-based Vetiva Capital still asks investors to “hold” the stock. The analysts hold rating assigned to Total Nigeria Plc stocks relates to their consideration that its is correctly valued with little upside or downside, and “where potential return between +5 and +14.99percent is expected to be realised between current price and analysts’ target price”.

The analysts do not foresee deregulation in the sector in the near-term even as the 2019 general elections draw nearer. As such, they expect the current status quo in the sector to be maintained – NNPC to remain the sole importer of PMS, rationing the supply to marketers at regulated thin margins.

The company’s net profit margin dropped from 5.1percent in 2016 to 2.8percent in 2017; even as pretax profit margin dropped from a high of 7percent in 2016 to 4.1percent in 2017.

The analysts also expect to see normalisations across a number of line items in TOTAL’s FY’18. “As earlier highlighted, selling and distribution came in quite low given historical trend, current level of sales as well as inflationary pressures during the year. With improving operating cash flow, we expect the oil marketer to be less dependent on overdraft financing over the course of the year. As such, we revise our FY’18 Net Finance cost to N2.3 billion (Previous: N2.6 billion). After updating our model, we revise our FY’18 PAT lower to N3.9 billion (Previous: N4.7 billion),” Vetiva researchers stated.

The share price of the company stood at N217 as at Monday February 26 with market capitalisation at N73.676billion and shares outstanding of 339,521,837 units. Vetiva has set a target price (TP) of N258.67 for Total Nigeria stock.

Total Nigeria Plc is listed on the Oil & Gas sector (petroleum and petroleum products subsector) of the Nigerian Stock Exchange (NSE). The year-to-date (ytd) return of Total Nigeria Plc share at minus 5.63 percent implies it has underperformed the NSE ASI. 

Further in their equity commentary on Total Nigeria Plc, Vetiva researchers maintained their erstwhile outlook on TOTAL. “The company remains well positioned to maintain its long-standing dominance in the Nigeria downstream petroleum industry given its fuel distribution network even as it continues to expand its asset base”, the analysts added.

Total is one of the largest marketers and distributors of petroleum products in Nigeria. The company offers various fuel products, including petrol, diesel, and kerosene. It operates 550 service stations, 5 LPG bottling plants, 3 lubricants blending plants; and 5 aviation storage facilities.

Return on Average Assets (RoAA) which stood at 13.4percent in 2016 dropped to 6.5percent in 2017.

“Notwithstanding, policy catalyst particularly in form of full liberalisation of the sector is required to extract optimal value from these assets. With oil prices expected to remain strong in 2018, we expect PMS landing cost to remain higher than the regulated pump price band of N135 -N145/litre making it uneconomical for independent markets to import”, Vetiva stated further.

Iheanyi Nwachukwu

by Iheanyi Nwachukwu

March 1, 2018 | 1:08 am
12893  |   93   |   0  |   Start Conversation

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