Total Nigeria speeds up growth in second quarter

Total Nigeria began this financial year’s operations on high speed, which it has accelerated further in the second quarter. Inability to grow sales revenue was the company’s challenge in the first quarter, which it has remedied in the second quarter. The company grew after tax profit by over 530% at the end of the first quarter. It has again multiplied the first quarter figure more than three times to register one of the greatest profit advances seen so far this year.

The petroleum marketer earned about 70% of last year’s closing profit in the first quarter. At the end of the second quarter, it stood well above the full profit in 2015. Sales revenue is headed well above the 2014 peak to a new high and after tax profit could multiply close to four and half times. The company used to lead the entire market of listed companies by earnings per share until the oil market-induced declivity undermined its growth functions in 2009.

For the first time since 2008, Total Nigeria is again leading listed companies by earnings per share. Nestle maintained the lead until the listing of Seplat Petroleum but with a profit drop of 94% by Nestle at half year and Seplat Petroleum down with a loss, Total appears to have no challenger for this year so far. The company gives every indication of being one of the few fertile grounds where the biggest shareholder wealth is being created in 2016 going by the exceptional growth rate seen in the first two quarters of the year.

Moving swiftly from a slight decline in sales revenue in the first quarter, the company raised turnover by close to 30% to N145.48 billion at the end of the second quarter. The company recorded a decline in sales revenue last year but a major rebound is expected this year with the increase in products prices and stable supplies.

With accelerated growth in the second quarter, turnover projection is revised upwards from N241.3 billion to N293.6 billion for Total Nigeria in 2016. This will be an expected increase of 41% from N208.3 billion last year and a 22% rise above the company’s peak revenue figure of N240.62 billion recorded in 2014. The company had maintained stable growth in sales revenue in recent years until the decline in 2015.

The big event for Total Nigeria so far this year remains the exceptional profit growth at 530.6% year-on-year in the first quarter and a further 270.6% year-on-year rise at the end of the second quarter. After tax profit multiplied more than three times from N2.82 billion in the first quarter, to N8.93 billion in the second quarter. This has raised the company’s profit from 70% of last year’s full year figure at the end of the first quarter to 120.5% at the end of the second quarter.

Based on the second quarter growth rate, the full year after tax profit projection is revised upwards from N11.81 billion to N18.3 billion for Total Nigeria in 2016. This is indicating that the company could multiply its closing profit figure of N4.05 billion in 2015 four and half times at the end of 2016. Total Nigeria had lost profit for the second year in 2015 from its peak profit figure of N5.33 billion in 2013.

The exceptional growth in profit so far this year came from increased cost efficiency gained in the company’s three major expense lines – cost of sales, administrative and interest expenses. Against the 30% growth in sales revenue, cost of sales grew by 23.5% and therefore claimed a reduced share of turnover. That permitted gross profit to grow more than two and half times as fast as sales revenue to N22.91 billion at the end of June.

The second major cost saving came from administrative expenses, which continued to decline – 8% in the first quarter and 7% in the second. Despite that selling and distribution costs grew by over 23% and other income went down by 27% from an upsurge of 343% in the first quarter, operating profit advanced by 336% to N13.03 billion, smashing the record jump of 223% in the first quarter.

The third element of the company’s cost saving tripod is in respect of finance cost, which increased its pace of decline in the second quarter. Finance expenses dropped by 62% in the second quarter to a little over N274 million after falling by 45% year-on-year in the first quarter. The company had balance sheet debts of N14.36 billion at the end of the second quarter.

A sharp reduction in the cost-income ratio lifted net profit margin from 1.9% at the end of last year to 4.7% at the end of the first quarter and further to 6.1% at half year. The company hasn’t seen this level of profit margins in several years.

Total Nigeria earned N26.31 per share at the end of the second quarter, up from N7.10 in the same period last year. Full year outlook indicates earnings per share of N54 for Total Nigeria in 2016. The company earned N11.92 per share at the end of 2015 and paid out a total cash dividend of N14 per share.  It has announced an interim dividend of N3.0 per share, which closed on 22nd August and payment made on 6th September.