TotalEnergies loses profit to N16.4bn despite Q4 upturn

TotalEnergies Marketing Nigeria Plc rebounded with a profit improvement in the final quarter of  2022 after two successive quarters of profit declines. But the company still closed the full year with earnings slightly down to N16.4 billion.

The full year financial report at the end of December 2022 shows that the energy marketing company raised the bottom line in the final quarter by 13 percent quarter-on-quarter to N3.9 billion.

This is a turnaround from profit drops of 18 percent to N4.2 billion in the second quarter (Q2) and 25 percent to less than N4 billion in the third (Q3).

A strong profit improvement of 47 percent to N4.3 billion in the first quarter (Q1) diluted much of the declines but still left profit down by 2.6 percent at full year.

It is a complete loss of the high growth momentum with which the company multiplied after-tax-profit more than eight times to N16.8 billion in 2021.

A strong growth in sales revenue that powered the exceptional profit advance in the preceding year still happened in 2022. However, a considerable cost saving that accompanied the growth in sales could not be repeated in 2022.

Costs generally changed their moderated behaviour to a revenue-consuming upsurge, which constricted margins and clogged the ability to convert revenue into profit.

Turnover grew by 41.4 percent to N482.5 billion at the end of the year, a top record growth after an outstanding increase of 66.7 percent in turnover in 2021.

A stronger growth of input cost than revenue seen through the interims followed the company to full year. Cost of sales rose ahead of sales revenue at 47.5 percent to close at over N422 billion at full year.

Cost of input, therefore, claimed an increased share of sales revenue at 87.5 percent compared to less than 84 percent in the preceding financial year.

The incursion limited the increase in gross profit to 9.4 percent to close the year at N60 billion. Other pressures on both the sides of cost and income weakened profit performance down the line.

Other income went down by over 22 percent to N3.5 billion while selling and distribution expenses grew by 14.6 percent to N3.7 billion and administrative cost increased by 6 percent to roughly N32 billion.

Operating profit improved by 8.8 percent to N28 billion at the end of the year, stretching out from flat position at the end of Q3. The big boost came from the final quarter performance that saw an outstanding growth of 43.7 percent in operating profit quarter-on-quarter to N7.4 billion.

The upturn in the final quarter was driven by cost savings from selling and distribution expenses and administrative cost. The two expense lines dropped by 18.3 percent to N651 million and 9.4 percent to over N8 billion respectively.

Yet, further constraints on the company’s earnings came from an upsurge in finance expenses that multiplied more than three times in the year, to stand at N5.5 billion. Finance income grew equally strongly at 171.6 percent to N2.2 billion.

Net finance expenses raced up close to three and half times to close at about N3.3 billion at full year.

The increase in finance expenses reflects increased borrowings from N15 billion at the end of the prior financial year to over N48 billion at the end of the 2022 operations. The closing debt figure is, however, a big slash in the final quarter from almost N107 billion at the end of Q3.

The cost increases hindered the company’s ability in converting strong revenue growth into profit. This reflects loss of profit margin from 4.9 percent in 2021 to 3.4 percent at the end of 2022.