Total Nigeria Plc H1’19 – Operational Efficiency To Cushion Earnings in H2

Must Read

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

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

Ankara Styles For Slim Ladies: Top 5 Looks You Must Try! (Pictures)

Today’s fashion of Nigeria shows off plenty of Ankara styles for slim ladies, that will help them to create a...

Toyota Introduces New Camry and Avalon All-Wheel Drive Sedans (Photos)

Developed and Assembled in the U.S. Exclusively for North America Available as Stand-Alone Option on Most Model Grades ...
- Advertisement -
- Advertisement -

Petroleum products sales dip q/q

In Q2’19, TOTAL’s turnover markedly slid 9% y/y to ₦73 billion, underperforming our estimate of ₦76 billion. The fall in turnover was principally driven by the 6% q/q decline in sales of petroleum products, reflecting a catch-up occurrence to lower petroleum imports by the Nigerian National Petroleum Corporation (NNPC). Given the cyclical nature in the downstream market where the third quarter usually emerges the weakest, we expect sales of petroleum products to moderate further to ₦58 billion (- 3% q/q) in Q3’19. However, in Q4’19, we expect sales from this segment to strengthen to ₦59 billion (+2% q/q), largely supported by the customary strong demand for refined petroleum commodities during the December festive season. Meanwhile, Q2’19 lubricants turnover came in flattish at ₦14 billion (+2% q/q), in line with our estimate. Looking ahead, we have revised our FY’19 revenue forecast for lubricants operations lower to ₦54 billion (previous estimate: ₦56 billion), following the stiffer-than-anticipated competition in the lubricants space.

Read:  Dangote Cement Strengthens Pan-African Market Volume, Appoints Acting CEO For Congo Operation

Improved operational efficiency buoys margins

Gross margin improved to 11.7% in Q2’19 (Q1’19: 10.5%), despite higher estimated landing costs, witnessed during the quarter, as Brent prices averaged $68/bbl in Q2’19, compared to $64/bbl in Q1’19. Meanwhile, in Q2’19, TOTAL was more operationally efficient, as operating expenses-to sales ratio improved to 9.1% (Q1’19: 9.3%). Consequently, operating margin improved to 3.7%, twice the figure in Q1’19. Our revised valuation for TOTAL yields an FY’19 gross margin of 11.2% (previous estimate: 10.5%), lifted by our expectation of lower crude prices (Average Brent priceH1’19: $66/bbl, H2’19E: $64/bbl), coupled with increasing lubricants contribution to top line. We have also raised our FY’19 operating margin forecast to 2.8% (previous estimate: 2.2%).

Read:  First Liver Bypass Surgery in Nigeria And Sub-Saharan Africa is Performed At EURACARE Multispecialty Hospital Without Open Surgery
Read:  NNPC Begin Exploration Of Oil Field In Benue, As They Pledge Security Assurance

High finance costs drag earnings

TOTAL’s Q2’19 earnings were further pressured by high finance costs which rose to ₦2.0 billion (Q2’18: ₦1 billion, Q1’19: ₦1.9 billion), resulting in a steep fall in after-tax profit to ₦734 million (Q2’18: ₦4 billion). The reported profit after tax was, however, an improvement from Q1’19 performance, where the company turned a loss of ₦604 million. In our revised valuation of TOTAL, we have lowered our turnover estimate to ₦295 billion (previous estimate: ₦311 billion). Following the surprising earnings performance in Q2’19, our estimate for after-tax earnings has been raised to ₦933 million (previous estimate: ₦89 million), riding on improved margins and anticipated operational efficiency in H2’19. As such, our target price for TOTAL has been revised slightly higher to ₦249.46 (previous estimate: ₦248.34).

Insights provided by Vetiva Research

- Advertisement -

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.


Please enter your comment!
Please enter your name here

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

Latest News

Shade Corner Episode 10 Nollywood Life

We are Talking Nollywood For Life  in Episode 10 of Accelerate TV’s Shade Corner Season 3 Can a Shade...

Mouka Ups Game for Sustainable Market Control, Earns NSP’s Endorsement

One of Africa's leading mattress and beddings company, Mouka, has recently introduced an improved version of its Orthopaedic mattress range, Regal and Regina to...

Toyota Introduces New Camry and Avalon All-Wheel Drive Sedans (Photos)

Developed and Assembled in the U.S. Exclusively for North America Available as Stand-Alone Option on Most Model Grades Exemplary Fuel Efficiency with 202-Horsepower...

Tetra Pak launches 2019 Index Based on Ipsos global study

New report focuses on the convergence between consumer perceptions of health and the environment, particularly in the food and beverage industry. In a study carried...

More Articles Like This