Total Energies Plc has consistently paid dividends since 2006, with a payout of 79 percent in the past seventeen years validating improved earnings and cash flow generation.
The largest downstream oil and gas firm has a dividend yield of 6.97 percent and a price-to-earnings multiple of 7.41 times making the stock attractive.
This year, earnings are expected to get a boost from a possible removal of subsidy on petroleum products as sector players are reeling from inflationary pressures, foreign exchange liquidity constraints, and inadequate infrastructure.
Total Energies, a major Nigerian downstream player, is expanding its presence in oil and gas infrastructure, with a modest 3 percent increase in its profit after tax amounting to N8.79 billion in the first half of 2023 compared to N8.53 billion recorded in the same period of 2022.
The firm’s revenue however surged to N274.6 billion in the first half of 2023, indicating a 31.4 percent increase from N209 billion in the comparable period of 2022.
Further analysis revealed the contribution of the revenue segment which includes Petroleum products and Lubricants contributed N211.2 billion and N147 billion to the total revenue of N274.6 billion.
TotalEnergies’ cost of sales took out 87.3 percent of the total revenue worth N274.6 billion in the first half of 2022.
Although Total Energies faced high costs, with the cost of sales consuming 87.3 percent of the total revenue.
The cost of sales for the first half of the year amounted to N239.6 billion in the first half of 2023, a 33.9 percent rise compared to N179 billion recorded in the same period in 2022.
Cost of sales ratio
TotalEnergies saw its cost to sales take out 87.2 percent of its revenue between January to June 2023, from 85.7 percent recorded in the preceding year.
The cost of sales ratio is a financial ratio that compares a company’s expenses generated by sales activity to its revenue.
TotalEnergies’ gross margin dropped to 0.127 percent in the first half of 2023 from 0.142 percent in the same period of 2021.
Gross margin is the amount of money a company retains after incurring the direct costs associated with producing the goods it sells and the services it provides.
TotalEnergies’ working capital was N8.58 billion in the first half of 2023. This implies the firm has N8.58 billion at its disposal in the short term if it needs to raise money for a specific reason.
A positive working capital means the company’s current assets are more significant than its current liabilities. The company has more than enough resources to cover its short-term debt, and there is residual cash should all current assets be liquidated to pay this debt.
Negative working capital is an indicator of poor short-term health, low liquidity, and potential problems paying its debt obligations as they become due.
TotalEnergies’ profit margin dropped to 3.2 percent in the first half of 20023 from 4.08 recorded in the same period of 2022.
This figure indicates that for every N100 in sales, the surveyed firm generates a profit of 3.2 percent, while the remaining 96.8 percent covered costs.
Profit margin is the measure of a business’s profitability. Profit margin gauges the degree to which a company or a business activity makes money.