TUES, MAY. 02 2023-theGBJournal|TotalEnergies Marketing Nigeria Plc (TOTAL) reported revenue growth of 38.6% y/y in Q1-23, underpinned by increases across the business’ three segments – Network (+28.1% y/y | 49.1% of revenue), General Trade (+46.1% y/y | 39.0% of revenue) and Aviation (+51.2% y/y | 12.0% of revenue).
Analysts at Cordros Research attributes the improved performance to the uptick in fuel prices – PMS: +50.4% y/y; AGO: +120.0% y/y; and DPK: +138.9% y/y – in the period. Analyzing product segments, the marketer’s revenue from petroleum products grew by 54.4% y/y (77.6% of revenue), while revenue from lubricants and other lines declined by 1.0% y/y (22.0% of revenue).
On a q/q basis, revenue shrank by 6.9% y/y following declines from General Trade (-12.1% q/q) and Aviation (-31.5% q/q) business segments, amid a 7.7% q/q increase in the Network segment.
The energy company also reported a 4.6% y/y decline in EPS to N12.26 (Q1-22: N12.86). The weak outturn reflects the higher costs (+44.7% y/y) in the period.
Gross margin (-375bps y/y) came in lower at 11.1% y/y, as cost of sales (+44.7% y/y) grew faster than revenue (+38.6%). A breakdown of the costs incurred in the period reveals increases in inventory of lubes, greases, and refined products (+45.6% y/y) and transport of supplies (+40.4% y/y). Consequently, EBITDA (-192bps) and EBIT (-141bps) margins printed lower at 6.8% and 5.4%, respectively, amid a 0.1% y/y decline in operating expenses.
Net finance cost increased significantly to N858.19 million (Q1-22: N77.64 million), due to a 110.6% y/y increase in finance cost, outpacing the slight 9.1% increase recorded from finance income. Specifically, the higher finance cost was driven by increased expense on interest on import (+339.6% y/y to N893.88 million) and other (+33.3% y/y to NGN686.83 million) loans.
Overall, profit before tax settled at N6.42 billion (Q1-22: N6.55 million). Following a tax expense of N2.26 billion, profit after tax printed NGN4.16 billion (Q1-23: N4.37 billion).
”TOTAL’s performance continues to reflect the plethora of challenges in the downstream oil and gas sector, the chief of which is the ballooning cost pressures,” Cordros notes.
Adding, ”it is also concerning that revenue contribution from non-white products which increased markedly in 2022 has declined. We believe that through 2023E, cost pressures will continue to undermine the marketer’s profitability.”
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