Shares of downstream oil and gas company, Total Nigeria, plunged to a five-year low, Tuesday, as a general market rout weighed on the oil and gas firm.
The stock resumed the trading week on a bearish note after price dipped 7.14 percent to N130 to further worsen its year to date performance to a negative return of 38.1 percent and negative 1 year return of 28.93 percent.
The performance of the company’s stock could be attributed to the negative sentiment inherent on the Nigerian stock exchange (NSE) market which has seen companies stock prices bottom, coupled with challenges faced in the industry.
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Total Nigeria’s financial performance could also be attributed as reasons investors are selling off on the company’s stock.
A quick review of company’s financials revealed that in the first quarter of 2019, while revenue rose slightly by about 2 percent to N77.4 billion, total recorded a loss before tax of N418 million against a profit of N2.6 billion in the corresponding period of 2018.
This further saw Total into a loss after tax of N474 million in Q1 2019 against a profit after tax of N1.6 billion in Q1 2018.
On the back of an increase in interest rate on bank overdraft and loans, Total recorded a spike in its finance cost which rose to N1.7 billion in the period under review from N614 million in 2018.
An industry based analysis of oil and gas companies show that stocks of Total on the NSE stood as the worst performer YTD as investors have lost a whooping N24.7 billion in market value.
The last 10 years have seen investors in the Nation’s bourse demonstrate low appetite towards shares of companies in the oil and gas downstream sector on the back of a plethora of challenges which have wiped out the margins of the oil marketing and trading companies as well as other importers of petroleum products.
According to stakeholders in the industry, these challenges ranges from poor governance and management of refining assets to low operating margins for operators, low return on equity, huge debts/receivables on account of unpaid accumulated subsidy and unpaid interest and foreign exchange differentials on product importation.
Going forward, while analysts have forecasted a bearish market for the rest of the year on the back of sluggish fiscal policies, anticipated earnings season should provide some respite for companys’ stock performance on the back of strong earnings.
“Total stock price could decline further if the company’s financials aren’t good enough in second quarter results,” Paul Uzum a Lagos based stockbroker told BusinessDay.
The last five years have returned negatively to investors of any investment horizon as 1 year return stood at -28.93 percent, 2 years (-50%), 3 years (-28.57%), 5 years (-33.50%).
David Ibidapo
