TOTAL NIGERIA PLC – Fairly Resilient Earnings For A Tough FY’17

Must Read

2020 Brand Africa 100: These are the 10 most admired brands in Africa

NIKE RETAINS #1 IN AFRICA FOR THIRD YEAR IN A ROW AFRICAN BRANDS DROP BY OVER 60% IN...

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is...

Top 10 Most Expensive Universities In Nigeria

For many Nigerians, high-quality higher education is a luxury. There are many private universities who are known not only...
TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

Fairly resilient earnings for a tough FY’17

  • EPS slumps y/y but still ahead of estimate
  • Final dividend of ₦14.00/share takes total dividend to ₦17.00/share
  • Full liberalization remains the biggest upside to earnings
  • FY’18 earnings to normalize, valuation supported by strong cash flow                                              

EPS slumps y/y but still ahead of estimate

TOTAL reported a 46% y/y drop in FY’17 profit after tax to ₦8.0 billion, translating to an EPS of ₦23.62 (FY’16: ₦43.58). However, considering the challenging operating landscape in the Nigerian petroleum downstream sector over the course of the year, we find this performance quite impressive even as the reported EPS beat our ₦18.95 expectation. We recall that FY’16 was a very strong base year, bloated by the impact of partial liberalization of the downstream sector (May 2016) and low oil prices on earnings. Notably, the Board of Directors proposed a final dividend of ₦14.00/share, taking total dividend for the year to ₦17.00 (maintaining the record year dividend paid in FY’16). Also, we highlight the improvement in TOTAL’s cash position in Q4. Drilling down into the full year line items, most of the numbers came much in line with expectation. FY’17 revenue was flat y/y at ₦288 billion (Vetiva: ₦301 billion) following a further 2% q/q decline in Q4 when fuel shortages were severe. Gross margin for the year printed at 10.2% (Vetiva: 10.0%) amidst margin cap on PMS supply from NNPC, and as strong crude oil prices in Q4 pressured cost of base oil (main input for Lubricant).

Full liberalization remains the biggest upside to TOTAL earnings          

- Advertisement -

We maintain our 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 (FY’17 CAPEX: ₦7.2 billion, FY’16: ₦5.4 billion). Notwithstanding, policy catalyst particularly in form of full liberalization 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 ₦135 – ₦145/litre making it uneconomical for independent markets to import.  Hence, we do not foresee deregulation in the sector in the near term even as the 2019 general elections draw nearer. As such, we 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. With fuel shortages slightly worse than anticipated thus far in 2018, we cut our FY’18 revenue to ₦300 billion (Previous: ₦313 billion).

Read Also:  2017 Cheki Dealer Conference And Awards (Photos)

FY’18 earnings to moderate, valuation buoyed by strong cash flow

We expect to see normalizations across a number of line items in TOTAL’s FY’18. As earlier highlighted, Selling & Distribution came in quite low given historical trend, the current level of sales as well as inflationary pressures during the year. As a percentage of sales, the expense line printed at 0.9% for FY’17 vs the average 2.0% in the last five years. We have taken a conservative stance in estimating the expense line going forward and thus forecast FY’18 at 1.7%. Also, Other Income of ₦3.9 billion consists of some items which we do not see as recurring items – Reversal and re-measurement of FX forward contract (₦1.6 billion), FX gains (₦1.0 billion) and Gains on PPE (₦0.1 billion). After adjusting for non-recurring income from FX transactions and gains from asset disposal, we forecast Other Income of ₦2.1 billion for FY’18. Also, we do not expect the ₦1.9 billion from “Forex differential on Petroleum Subsidy Fund (PSF)” recognized in Q3’17 to re-occur, hence we exclude this from our forecast going forward. 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 ₦2.3 billion (Previous: ₦2.6 billion). After updating our model, we revise our FY’18 PAT lower to ₦3.9 billion (Previous: ₦4.7 billion). Largely buoyed by the strong improvement in cash position however, we have revised our Target Price to ₦258.67
(Previous: ₦249.67).

Read Also:  African Development Bank, African Fertilizer And Agribusiness Partnership Sign $5.4 Million Agreements To Foster Fertilizer Market In Nigeria And Tanzania

TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

- Advertisement -

TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

- Advertisement -
TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17

Latest News

Sanwo-Olu Commissions 264 Units of Flats in Lekki (Photos)

Governor: "We Will Build Affordable Houses For Lagosians-Sanwo-Olu" ...Project is a successful public-private collaboration- Commissioner The Lagos State Governor Mr. Babajide...

MPC slashes interest rate to 12.5%

The Central Bank of Nigeria (CBN) held its bi-monthly Monetary Policy Committee meeting today May 28, 2020. Against the 2-day traditional timeline for the...

Deloitte Ranked No. 1 Consulting Service Provider Worldwide By Revenue According To Gartner

Deloitte has been ranked No. 1 by revenue according to Gartner, the world’s leading information technology and advisory company, in its May 2020 report...

Hyundai Motor and Sony Pictures Entertainment Announce Unique and Pioneering Multi-Picture Promotional Partnership

Hyundai Motor Company and Sony Pictures Entertainment today announced they have entered into a unique and unprecedented multi-picture promotional partnership that will feature the automaker’s new models and technologies in upcoming...

Working From Home: 8 Tips For Getting It Done

Most of us are well into the working from home routine and have adjusted to different spaces, pets and children on work calls, and...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17TOTAL NIGERIA PLC - Fairly Resilient Earnings For A Tough FY’17