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    TOTAL   NGTOTAL00001

TOTALENERGIES MARKETING NIGERIA PLC

(TOTAL)
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Total Nigeria : Migrates From Half-Year Loss to Profit

08/23/2021 | 12:06pm EST

Total Nigeria Plc migrated from half year 2020 loss to a profit for the half year ended June 30, 2021 following its improved revenue and cut in finance cost.

Effective management of finance cost and Impairment loss on trade receivables was Total Nigeria's profit defensive strategy to compensate for last year weak revenue.

The petroleum marketing company report for half year (H1) ended June 30, 2021 shows that the first quarter (Q1) revenue growth and finance cost reduction reflected on H1 2021 performance, forcing the management to declare interim dividend.

With positive performance in profit, the company declared interim dividend of N4.00 per ordinary 50 kobo per share. The interim dividend translates into N1.36billion payout to shareholders of the company.

From the profit & loss figures, revenue showed increasing performance as the company leveraged on hike in price of Premium Motor Spirit (PMS).

Total Nigeria's revenue returned to its pre-pandemic level as it grew by 41.8 per cent to N151.33billion in H1 2021 from N106.7billion in H1 2020.

Revenue from Total Nigeria's petroleum products grew by 36.2 per cent to N114.04billion in H1 2021 from N83.74billion in H1 2020, while revenue from lubricants and others rose significantly by 62.3 per cent from N22.96billion in H1 2020 to N37.3billion in H1 2021.

Total Nigeria's revenue reported revenue showed that it remained a top pick in the oil and gas downstream sphere, given its robust distribution network (over 560 outlets major marketers' outlets).

As evidenced so far in H1 2021, Total Nigeria has leveraged its scale in making up for the pandemic-induced slump in earnings in 2020 financial year.

The growth was driven by a solid performance across the business' three segments - Network (+43.1per cent; 71 per cent of revenue), General Trade (+305 per cent; 24 per cent of revenue) and Aviation (+893.2 per cent; five per cent of revenue).

Increase in Demand

The increase across the business lines can be attributable to increase in demand given that the economy has effectively reopened, higher PMS prices (Average price: N167.18/litre in H12021 vs N137.60/litre in H1 2020) relative to Q2-20 and H1 2020, and the company's ability to substantially push out volumes given its vast storage and distribution channels. Also, cost of sales rose by 33.43 per cent to N125.83 billion in H1 2021 from N94.3 billion in H1 2020.

Consequently, the proportion of cost of sales/Revenue dropped to 83.15per cent in H1 2021 from 88.2 per cent in H1 2020.

With increase in revenue, the company's Gross profit grew significantly by 105.67 per cent to N25.5billion in H1 2021 from N12.4billion in H1 2020.

Other income also grew by 217.4 per cent to N2.47billion in H1 2021 from N779.4million reported in H1 2020, attributable to N1.26billion network income in H1 2021 from N763.4million in H1 2020.

About 191.54 per cent increase in Gain on disposal of property, plant and equipment to N46.8million in H1 2021 from N16.05million in H1 2020 also contributed to growth in other income of Total Nigeria.

In the period, the company also reported N184million and N986.43million Gain on disposal of raw material and Net foreign exchange gain respectively, other two factors that contributed to other income.

The company in prior half year reported N241.7 million Net foreign exchange loss amid the instability foreign exchange due to dwindling global oil prices and the loss was not reported in the current half year.

Selling & distribution costs rose Selling & distribution costs rose by nearly four per cent to N1.61billion in H1 2021 from N1.67billion reported in H1 2020, while administrative expenses rose by 16.3 per cent to 13.78billion in H1 2021 from N11.85billion in H1 2020.

Impairment loss on trade receivables dropped by 49.6 per cent to N67.6million in H1 2021 from N134.14million in H1 2020 to position operating profit to N12.53billion in H1 2021 from a loss of N716.8million in H1 2020.

On finance, the company reported finance income of N94.6million in H1 2021 from N2.15billion in H1 2020 as the company was not paid Petroleum Subsidy Fund (PSF) in the period under review compared to N2.04billion paid in H1 2020.

Interest on unclaimed dividend also dropped to N13.5million in H1 2021 from N32.45million in H1 2020, while interest on loans and receivables closed H1 2021 at N63.78million in H1 2021 from N62.67million in H1 2020.

Finance cost, however, dropped by 57 per cent to N842million in H1 2021 from N1.95billion in H1 2020.

Majorly, 41 per cent drop in Total Nigeria's decline in finance Interest on bank overdrafts and loans to N635.3million in H1 2021 from N1.08billion in H1 2020 was responsible for drop in finance cost in the period.

With effective management of finance, Profit before income taxation closed for the period at N11.78billion as against loss of N796.9million reported in prior half year result and accounts.

Profit for the period closed at N8.07billion in H1 2021 from loss of N537.2million in H1 2020.

The company's Earnings per share closed H1 2021 at N28.76 per share from a loss of N1.58 reported in H1 2020.

Trade & Receivables

The petroleum marketing company grew its total assets in the period under review following growth recorded in its Current trade & other receivables and loans & borrowing.

The company total assets hits N186.9billion as at June 30, 2021 from N143.6billion reported in full year ended December 31, 2020.

The 30 per cent increase in total assets was driven by 34.4 per cent increase in trade & other receivables to N55.57billion as at June 30, 2021 from N41.34billion reported in ful year ended December 31, 2020.

Customers account contributed to current trade & other receivables in the period, accounting for N20.8 billion as at June 30, 2021 from N17.4billion reported in full year ended December 31, 2020.

Advanced supply of products nearly doubled at about 97 per cent growth to N17.8billion in H1 2021 from N9.06 billion reported in full year ended 31, 2020.

Total equity closed the period at N32.82billion as at June 30, 2021, about 17 per cent increase from N28.15billion reported in full year ended December 31, 2021.

Retained earnings played a significant role in total equity increase in the period, gaining 16.7 per cent to N32.65billion as at June 30, 2021 from N27.98billion reported in full year ended December 31, 2020.

Analysts review

Commenting, analysts at Cordros securities said they remain optimistic for second half year performance of Total Nigeria.

They said, "As the economy has effectively reopened, we believe demand for petroleum products in the year will return to pre-pandemic levels. As such, we forecast 33.6per cent revenue growth in 2021FY. Over the medium term (2022-2025FY), we model average annual revenue growth of 10.5% per cent, given our expectation that Total Nigeria will sustain its volume expansion drive.

"We estimate gross margin will decline by 200bps to 13 per cent in 2021E, given (1) the pass-through impact of the rise in crude oil prices on costs of production and (2) inflationary pressures due to structural inefficiencies and currency weakness. However, we expect the topline growth to support EBITDA and EBITDA margin and cushion the pressure from higher operating expenses.

"Thus, we project 2021E EBITDA and accompanying margin will increase by 64.3 per cent and 113bps, respectively. We forecast EPS of N18.56 in 2021E, implying growth of 205.4 per cent y/y compared to the decline in 2020FY (-9.5 per cent y/y). Further out, we forecast an EPS CAGR of 10.6% in 2021-2025FY. Our EPS forecast aligns with Bloomberg consensus estimate of N18.00 in 2021FY."

Copyright This Day. Distributed by AllAfrica Global Media (allAfrica.com)., source News Service English

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Financials
Sales 2021 300 B 732 M 732 M
Net income 2021 10 582 M 25,8 M 25,8 M
Net Debt 2021 12 648 M 30,9 M 30,9 M
P/E ratio 2021 6,95x
Yield 2021 8,76%
Capitalization 73 608 M 179 M 180 M
EV / Sales 2021 0,29x
EV / Sales 2022 0,26x
Nbr of Employees 434
Free-Float 38,0%
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Mean consensus BUY
Number of Analysts 5
Last Close Price 216,80 NGN
Average target price 235,81 NGN
Spread / Average Target 8,77%
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Managers and Directors
Samba Salfal Seye Managing Director
Stanislas Mittelman Chairman
Felix Majekodunmi Non-Executive Director
Tejiro Ibru Non-Executive Director
Ahmed Rufa'i Sirajo Non-Executive Director