Total Nigeria Plc, the company that distributes and markets refined petroleum products and fuels has overcome the subsidy gloom by posting a profit after tax of N1.96 billion in the first six months of the year.
The company’s profit before tax increased by 8 percent to N3.68 billion in June 2015 as against N3.42 billion as at June 2014.
The bottom line got a tremendous boost from a 439 percent surge in other income to N2.64 billion.
This means the company’s investments from ordinary activities are driving profits.
Analysts say Total Nigeria’s profit position is impressive given unpaid government debt denting the bottom line of firms operating in the sector.
Oil product marketers in Africa largest economy have been in dispute with the government over unpaid subsidy arrears of $1 billion.
The dispute led to a three week strike by the marketers that grounded economic activities earlier in the year.
Government still own these firms as much as N300 billion, industry sources say.
Analysts say speedy payments of arrears will help firms pay debts owed to lenders and also reduce the exposure to currency risk caused by the devaluation of the naira.
Total Nigeria’s sales reacted to the challenging environment as sales fell by 7 percent to N111.97 billion in June 2015 as against N120.15 billion last year.
Cost of sales was down by N98.93 billion in June 2015 compared with N106.00 billion last year.
Operating expenses increased by 10 percent to N11.28 billion in June 2015 as against N10.22 billion in June 2014.
Analysts say the ease in scarcity of the downstream oil and gas sector products following the resolution of the dispute will be a major driver of Total Nigeria growth.
“We understand that importation of petroleum products has picked up in Q3 2015. In addition, products scarcity which lasted for around 4 months has fully abated. As such we retain our double-digit top line growth forecast for H2 vs. H1,”said Uwadiae Osadiaye, equity research analyst at FBN Capital.
“Following management’s guidance, we also expect Total’s tax rate to return to normal levels of around 32-35%, down from an average of 54% in H1 2015. We estimate that sales are likely to come in flattish y/y for full year 2015E, but expect EPS to rise by around 4% y/y to N13.6,” said Osadiaye.
Total Nigeria’s total assets fell by 25 percent to N71.62 billion in June 2015 as against N95.50 billion as at June 2014.
Finance costs reduced by 28.28 percent to N717 million despite delay in subsidy payment.
The company’s share price closed at N143.50 on the floor of the exchange while market capitalization was N48.76 billion.
BALA AUGIE
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