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TotalEnergies Marketing Nigeria Plc’s (TOTAL) third quarter unaudited results showed a mixed performance, with substantial revenue growth (+78.4% y/y) offset by increasing cost pressures.
Key Highlights:
– Revenue growth driven by expansion across Network (+78.4% y/y), General Trade (+78.4% y/y), and Aviation (+78.4% y/y) segments
– Gross margin decline: 316bps y/y to 11.1% due to increased cost of sales
– EBITDA and EBIT margins expansion: 83bps y/y and 374bps y/y, respectively
– Net finance costs surge: 388.8% y/y to NGN6.61 billion
– Profit before tax increase: 258.6% y/y to NGN11.28 billion
– Profit after tax surge: 237.1% y/y to NGN6.85 billion
Challenges Ahead:
Despite impressive revenue growth, TOTAL faces challenges from:
– Sticky cost pressures
– Increasing operating expenses (+57.2% y/y)
– Lower product demand amid constantly increasing prices
– Inflationary pressures weighing on profitability
Further review of the company’s results in the period showed that, net finance costs increased by 388.8% y/y to NGN6.61 billion in Q3-24, attributable to a 244.4% y/y surge in finance cost. This surge was driven by a significant rise in interest on bank overdrafts (+21.3x y/y to NGN5.43 billion), interest on lease liabilities (+781.2% y/y to NGN207.67 million), and interest on import loans (+178.0% y/y to NGN2.82 billion). In contrast, interest on other loans decreased by 122.3% y/y to NGN246.07 million in Q3-24. On the other hand, finance income surged by 55.6% y/y to NGN1.61 billion.
Overall, profit before tax increased by 258.6% y/y to NGN11.28 billion in Q3-24 (Q3-23: NGN3.15 billion). After accounting for a tax expense of NGN4.43 billion (39.2% effective tax rate), profit after tax surged by 237.1% y/y to NGN6.85 billion in Q3-24 (Q3-23: NGN2.03 billion).
According to Cordros Research, TOTAL’s numbers came in as expected with topline growing markedly, highlighting the impact of higher PMS price, even as, cost pressures remain sticky.
“However, we are concerned that earnings in the quarter was propped by a one-off writeback on charges for no longer required technical services, following the substantial growth in operating expenses (+57.2% y/y). The performance booked, particularly in H1-24, would ensure TOTAL ends the year positively. Nonetheless, we cite that lower product demand amid constantly increasing prices presents a headwind for the foreseeable future. Our estimates are under review”, it added.
