FRI, 29 JULY, 2022-theGBJournal| TotalEnergies Marketing Nigeria Plc, a marketing and services subsidiary of the multinational energy company operating in 130 countries, TotalEnergies, published its Q2-22 unaudited financials Thursday, reporting an 18.3% y/y decline in Q2-22 standalone EPS to NGN12.26 (Q2-21: NGN15.01), bringing H1-22 EPS to NGN25.12 (H1-21: NGN23.76).
The EPS decline was driven by a sharp increase in the company’s costs (+36.1% y/y) and operating expenses (+19.7% y/y).
Revenue grew by 31.6% y/y in Q2-22, underpinned by the solid growth across the business’ three segments – Network (+49.7% y/y | 51.6% of revenue), General Trade (+10.4% y/y | 35.4% of revenue) and Aviation (+28.9% y/y | 13.0% of revenue).
We attribute the growth in revenue to the higher fuel prices (PMS: +4.3% y/y; AGO: +186.6% y/y and DPK: 85.4% y/y) in the period and TOTAL’s ability to maintain its volumes expansion given its vast storage and distribution channels.
Across the product lines, revenue from petroleum products grew by 24.8% y/y (71.6% of revenue), while revenue from lubricants and other lines grew by 47.5% y/y (28.4% of revenue).
On a q/q basis, revenue grew by 14.1% following the broad base increases in its Aviation (+33.6% q/q), Network (+10.1% q/q) and General Trade (+8.4% q/q) business segments.
Gross margin contracted by 282bps to 13.7% in Q2-22 (Q2-21: 16.6%) due to a faster growth in cost of sales (+36.1% y/y) relative to revenue (+31.6% y/y).
We highlight that the increased cost of sales was influenced by the rally in crude oil prices (Average Brent price: USD114.42/bbl in Q2-21 vs USD68.48/bbl in Q1-21). Stemming from the lower gross margin and a 19.7% y/y growth in operating expenses, EBITDA (-367bps) and EBIT (-329bps) margins printed lower at 6.2% and 9.5% (Q2-21: 9.5% and 13.5%), respectively.
Net finance cost increased by 19.7% y/y to NGN726.89 million (Q2-21: NGN607.33 million), primarily due to a 75.2% y/y increase in finance cost, amid a 660.9% y/y growth in finance income. We highlight that the outturn reflects a higher balance in interest on imports (NGN802.17 million | Q2-21: NGN10.56 million) and other loans (NGN1.08 billion | Q2-21: Nil).
Overall, the company recorded a profit before tax of NGN6.18 billion, representing a 16.8% y/y decline from the NGN7.43 billion recorded in Q2-21. Following a tax expense of NGN2.02 billion, profit after tax printed NGN4.16 billion, translating to an 18.3% y/y decline from the prior period (Q2-21: NGN5.10 billion).
According to analysts at Cordros Research, ‘’TOTAL’s Q2-22 result fell short of our expectations for the period following the effects of the rally in crude oil prices and the high inflationary environment on the company’s costs and, in turn, its margins and earnings.’’
Cordros say they however, expect the company to continue to show resilience given its market leadership status in the downstream oil and gas industry.
‘’We believe higher oil prices will remain a strong headwind to the company’s performance.’’
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