Nigeria’s biggest downstream firms paid N5.2 billion tax to the Federal Government in the first six months of 2022 despite the sector facing challenges from a dirty petrol saga and continuous government regulation.
Data sourced from the Nigerian Exchange Limited (NGX) showed the combined income tax paid by Total Energies, Conoil, Eterna, and MRS increased by 17percent to N5.2 billion in the first half of 2022 compared to N4.4 billion in the same period last year.
Income tax is deducted from the profit before tax to give the actual profit for the period, hence a higher tax will reduce the downstream sector’s profit for the year.
Further breakdown showed Total Energies paid the highest income tax of N4.2 billion in H1 2022, a 13 percent increase compared to N3.7 billion in the corresponding period last year.
Conoil paid an income tax of N625 million in H1 2022, a 23 percent increase from N500 million paid last year.
MRS and Eternal also paid an income tax of N123 million and N326 million respectively.
“With challenges facing petrol business due to absence of full deregulation, oil and gas firms were able to design their models to leverage business opportunities in lubricant, diesel and aviation fuel business,” Ola Alokolaro, partner, energy and infrastructure at Advocaat Law Practice, said.
Analysts believe these firms are expected to sustain their resilience and deliver decent returns to investors even amid poor valuations.
“On a balance of factors, we expect both revenue and earnings growth for the majority of the downstream players. Given that international oil prices trends northward, this would translate to retail prices of deregulated petrol products staying elevated,” said analysts at Meristem Securities.
“Improved economic activities would also translate to higher volume sales, further pushing increasing turnover. This would impact earnings for the period,” said the analysts.
BusinessDay’s findings showed Total Energies’ logged revenue of N209 billion in the first half of 2022, a 38 percent increase from N151.3 billion in the first half of 2021.
Revenue was obtained from petroleum products which amounted to N147 billion and also lubricants and others (N62 billion) in the first half of 2022.
The profit for the year grew by 8 percent to N8.5 billion from N8 billion in the first half of 2021.
Eterna logged a 50 percent increase in revenue to N57.2 billion from N38 billion in the first half of 2021.
Eterna obtained the most revenue from fuel and lubricants which amounted to N45.8 billion and N7.4 billion respectively.
Base oil and low pour fuel oil (LPFO) sales recorded N3.8 billion while the trading business contributed N183.2 million to the total revenue of N57.2 billion in the half year 2022.
Analysts at Afrinvest Securities in a recent report stated this as they maintained their Buy ratings on the stocks of Total Energies Marketing Nigeria Plc, Conoil Nigeria Plc, and Ardova Nigeria Plc, but Ardova posted a net loss in the first half of the year.
Compared to selected market peers (downstream) with an average P/E ratio of 14.1x, the Nigerian downstream oil companies (3.1% of total NGX equities capitalisation as of 30/06/2022) are priced at 3.5x, according to data gathered by Afrinvest Securities.