• Thursday, June 13, 2024
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BusinessDay

Downstream sector: How TotalEnergies outpace peers in nine months 2021

Total takes $6.5 billion impairment, cuts costs

Change is the only constant in life, and one’s ability to adapt to those changes determines the person’s success in life. These are the words of American-born Benjamin Franklin several decades ago and reflect the current efforts of Nigerian downstream firms to grow their business amid a myriad of headwinds.

Keeping businesses afloat in Nigeria’s downstream oil and gas sector has become extremely tough, especially after a pandemic era. A lot of companies have divested and the few existing ones have reduced their labour force to stay in business.

Few companies who have struggled to stay in business have witnessed a significant decline in bottom-lines, while others cut dividends to shareholders following dwindling fortunes occasioned by the difficult operating environment.

Analysis by BusinessDay showed the financial performance of five major companies operating in the downstream sector namely Ardova, Conoil, Eterna, MRS, and TotalEnergies in the first nine months of 2021.

TOTALENERGIES

TotalEnergies, currently the only International Oil Company (IOC) in Nigeria’s downstream sector with diverse innovations including lubricants, insecticides, and solar energy, recorded a surge in their nine-month profit after tax by 2,577 percent to N13.4 billion, the highest in ten years, compared to the N500.1 million recorded last year.

The company’s revenue also increased by 60 percent to N242.2 billion in the first nine months of 2021 compared to N151.7 billion last year. This was anchored on the 71.5 percent increase in the sale of lubricants and others to N61.6 billion in the first nine months of 2021 from N35.9 billion in the same period last year.

There was a 54 percent increase in the sale of petroleum products to N180.7 billion compared to N117.4 billion recorded in the same period last year.

The downstream company also recorded an increase in other income by 217 percent to 3.6 billion nine months this year from 1.2 billion recorded in the same period last year. This was anchored on the Net foreign exchange gain of 1.9 billion recorded this year compared to last year where nothing was recorded in that regard.

Earnings per share jumped 2582 percent to N39.43 from N1.47 recorded in the same period last year.

TotalEnergies’ shares closed flat at N221.9 per unit on Friday, 24th December 2021. The stock has returned 70.69 percent from the beginning of the year to date (24/12/2021).

The company’s total assets grew by 37.7 percent to N197.8 billion from N143.6 billion last year.

The revenue of Total energies encompasses three reportable segments which include Network (Sales to service stations), General trade (Sales to corporate customers excluding customers in the aviation industry), and Aviation (Sales to customers in the aviation industry).

The Network segment which includes sales to Service stations made up 53 percent to N128.4 billion of the total revenue, the General trade and Aviation segment made up 37 percent to N89.6 billion and 10 percent to N24.2 billion respectively of the total revenue.

On November 25, 2021, the Board of Directors approved the appointment of a Frenchman, Jean-Philippe Torres, as a Director and Chairman of TotalEnergies Marketing Nigeria Plc.

Ardova Plc

Ardova’s revenue grew by 6.2 percent to N136 billion in the first nine months of 2021. The profit for the year dropped by 34.3 percent to N1.24 billion in the first nine months of 2021 from N1.89 billion in the previous year. Cash flow from operating activities recorded a loss of N48 million for the nine-month period of 2021, this is 101 percent worse than the N4.3 billion gain in the previous year.

The company saw its Earning Per Share (EPS) declined to 0.95percent in the first nine months of 2021 from N1.45 in the same period of 2020. Ardova Plc’s total assets grew by 46 percent to N72.7 billion in the first nine months of 2021 from N49.8 billion in the previous year.

Conoil Plc

Conoil’s revenue rose to N101 billion in the first nine months of 2021 from N88 billion in the same period last year. Their profit for the year surged by 43.5 percent to N1.6 billion in the first nine months of 2021 from N1.1 billion in the same period of 2020.

The company’s Cash flow from operating activities dropped by 182 percent to a loss of N8 billion in the comparable period of 2021 compared to the profit of N9.98 billion in the period under review last year.

The earnings per share increased from N160 in the previous years to N230 as of nine months in 2021. Conoil Plc’s total assets fell to 48.8 billion from 52 billion in 2020 and they had a 1.6 percent profit margin.

Eterna Plc

Eterna Plc’s revenue grew to N61.4 billion from N44 billion in the previous year. The company’s Profit for the year grew by a whopping 114 percent to N416 billion in the first nine months of 2021 compared to N194 billion in the corresponding period last year.

Their cash flow from operating activities gained from N3.12 billion in the previous year to N3.14 billion in 2021. Earning per share rose to N0.32 from N0.15 in 2020. They had a 682 percent profit margin. Eternal Plc’s total assets recorded a 33 percent increase to N43.7 billion.

Read also:AGF backs midstream, downstream petroleum regulatory authority

MRS

MRS’s revenue rose by 68.8 percent to N53 billion in the first nine months of 2021 from N32 billion in the corresponding period last year. Their Profit after tax for the period ended September 2021 fell from N881 million to N40.8 million in the comparable periods.

The Net cash generated from operating activities recorded a loss of N1.6 billion, 489 percent worse compared to the N402 million gain in 2020.

The company’s earnings per share dropped to a loss of 13kobo in the period ended 2021 compared to last year where a loss per share of N2.89 was recorded. MRS recorded a decline in total assets to N35 billion in the first nine months of 2021 from N37.6 billion in the same period last year.

Overview

Stakeholders blame this year’s performance on old perennial environmental, operational and regulatory challenges. These include poor governance and management of refining assets, low operating margin for operators leading to low Return On Equity (ROE), huge debts/receivables on account of unpaid accumulated subsidy and unpaid interest, and foreign exchange differentials on product importation.

To overcome these challenges, the umbrella body for the major oil marketers suggested some important strategic steps which include the introduction of corporate governance, full deregulation of the sector, and the introduction of guilds that will increase the availability of skilled workmen and artisans in the industry.