Total Nigeria PLC – Better Margins, Debt Cut To Buoy FY’20 Earnings

Must Read

UCH Chief Medical Director tests positive for Coronavirus

Prof Jesse A. Otegbayo, the chief medical doctor, University College Hospital, Ibadan UCH has tested positive for coronavirus. This...

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 - Better Margins, Debt Cut To Buoy FY’20 EarningsTotal Nigeria PLC - Better Margins, Debt Cut To Buoy FY’20 Earnings
  • FY’19 fuel sales down 7% y/y
  • Lubricants operations grow 4% y/y
  • Bank overdraft declines to ₦35.9 billion (9M’19: ₦53.9 billion)
  • Target price revised to ₦198.12 (previous estimate: ₦197.26)

On Wednesday, TOTAL released its unaudited FY’19 results, reporting a 6% y/y drop in turnover to ₦291 billion (Vetiva estimate: ₦294 billion). Meanwhile, after-tax earnings came in at ₦2.4 billion (-70% y/y) for the full year, mainly supported by gains (₦2.7 billion) on asset disposal recorded in Q4’19.

Border closure to weigh on fuel supplies in 2020

As expected, TOTAL’s Q4’19 fuel segment posted a decline of 18% y/y to ₦58.1 billion (Vetiva estimate: ₦58.4 billion), taking FY’19 sales to ₦239.7 billion (-7% y/y). We attribute the underwhelming performance in Q4’19 fuel turnover to seemingly lower imports of petroleum products by the NNPC, following the move by the federal government to close all land borders. With the expectation of the borders remaining closed for most of H1’20, we foresee a further moderation in imports of fuels. Thus, we envisage that FY’20 fuel turnover will come in lower at ₦226.3 billion (-6% y/y).

Stiff competition caps lubricants growth to a single digit

- Advertisement -

Despite heightened competition in the lubes space, TOTAL’s lubricants operations reported a modest performance in Q4’19, with revenue from the segment climbing 4% y/y to ₦11.0 billion. This, however, underperformed our estimate of ₦13.4 billion. Overall, FY’19 lubricants sales recorded a single-digit growth of 4%, coming in at ₦51.2 billion (Vetiva estimate: ₦53.5 billion). In FY’20, given the aggressive drive by other industry players (notably FO and MOBIL) to further expand their market share, we forecast a conservative growth of 2% in TOTAL’s lubricants revenue to ₦52.3 billion and project a CAGR of 3% over the next four years.

Read:  Corporate Brief (A Glance): Total Nigeria Plc FY Ended Dec. 31st , 2017

Balance sheet deleveraging to support bottom line in 2020

Read:  TOP 5 WEEKLY STOCK PICK FOR THE PERIOD 06/05/2017 – 06/12/2017 & WATCH LIST

In Q4’19, TOTAL significantly deleveraged its balance sheet, as the company trimmed its bank overdraft to ₦35.9 billion from ₦53.9 billion as of 9M’19. As a result, finance costs fell 22% q/q to ₦1.7 billion (Vetiva estimate: ₦2.1 billion). We believe the cut in bank overdraft was funded by the significant jump in operating cash flows, which improved to ₦16.9 billion in Q4’19, a U- turn from a negative balance of ₦7.4 billion as at 9M’19—we specifically note that receivables fell by ₦17.3 billion during the quarter. Following comments from management at our last corporate visit, we expect a further cut in TOTAL’s debt portfolio, as the management aims to reduce the company’s exposure to a bank overdraft. With our projection for FY’20 operating cash flows at ₦14.4 billion, we expect the firm’s debt balance to decline to ₦29.9 billion, bringing finance charges lower to ₦5.6 billion (-29% y/y) in FY’20.

Read:  TOP 5 WEEKLY STOCK PICK FOR THE PERIOD 06/05/2017 – 06/12/2017 & WATCH LIST

2020 ROE to improve to 14% (FY’19: 8%)

- Advertisement -

We are somewhat optimistic about TOTAL’s bottom line this year, despite our anticipation of a drop in turnover to ₦278.6 billion (-4% y/y). For instance, we expect the improvement in gross margin, stemming from anticipated higher lubricants contribution to revenue mix, to take gross profit to ₦35.7 billion (+5% y/y). More so, we project a 6% y/y decrease in SG&A in FY’20, moving in tandem with turnover. Additionally, we project a surge in FY’20 profit before tax to ₦5.9 billion (FY’19: ₦3.7 billion), supported by our expectation of a 29% y/y drop in finance costs. Overall, we expect after- tax profit to come in at ₦3.9 billion (+63% y/y), translating to a ROE of 14% (FY’19: 8%).


- 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.

Latest News

COVID–19, COSCHARIS SHUTS DOWN LAGOS AND ABUJA OPERATIONS line with the Federal government directive As promised to continually update both all our internal and external stakeholders as...

Famfa Oil Pledge N1 Billion Naira to Support Nigeria’s Fight Against COVID-19

Mr. and Mrs. Modupe and Folorunso Alakija through Famfa Oil Pledge N1 Billion Naira to Support Nigeria’s Fight Against COVID-19. ⁣ As the world rallies to...

COVID 19: Nigerian Air Force postpones entrance examination into AFMS, AFGMS

The Nigerian Air Force (NAF) has postponed the entrance examination into its Military secondary schools for males and females in Jos owing to the...

Covid-19: Oyo State Taskforce impounds 22 cars from errant clubs (Photos)

The Oyo State Covid-19 Taskforce saddled with the responsibility to carry out the State’s effort to mitigate the spread of the virus and enforce...

Best SEO Marketing’s 3 tips to instantly increase sales for your business to tide through the COVID-19 pandemic

SINGAPORE - Media OutReach - 30 March 2020 - Amidst the COVID-19 pandemic, many business owners might be worried on how to tide through this period.  ...
- Advertisement -
BrandsPur Weekly Cartoons
%d bloggers like this: