Total Oil Nigeria Plc could give up on generous dividend payments as analysts expect the downstream oil and gas giant to record a loss this year.
The company is having multiple issues stemming from the lack of cost reflectiveness of Premium Motor Spirits (PMS) prices as the Nigerian National Petroleum Corporation (NNPC) assumed the position of 100 percent importation of domestic petrol consumed.
“Industry experts don’t believe the firm would declare dividends in 2019 because of the possibility of a loss making year, but we are not so sure,” said analysts at BUA Intelligence, in a note to clients.
Total Nigeria has been offering jaw dropping payouts and it has consistently been rewarding shareholders from distributable profit since 2010.
It has also been handing out N5.77 billion cash dividend or N17 dividend per share (DPS) since 2016 even as earnings per share (EPS) have been falling, according to data compiled by BusinessDay.
Its dividend yield (the dividend divided by share price) of 17.51 percent is the highest in the industry, according to data compiled by BusinessDay.
The charts shows Total Nigeria’s payout ratio was 117.45 percent in 2015, the highest in a since 2010, but the ratio has been rising steadily since 2016.
The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company. It is the percentage of earnings paid to shareholders in dividends. The amount that is not paid to shareholders is retained by the company to pay off debt or to reinvest in core operations.
The downstream oil and gas firm has a negative cash flow from operating activities of N9.85 billion as at June 2019.
It has total debt of N52.51 billion in June 2019, while debt to equity is at an all-time high of 200.19 percent. A high debt to equity ratio means the company runs its operations with more debt than equity.
Analysis of the half year results of Total Nigeria shows it is at the cusp of loss making as it capitulates to rising finance costs, ballooning operating expenses, and slow sales.
Profit was N129.97 million in June 2019, a 97.82 percent drop from N5.67 billion recorded last year, while the fastest expansion at the bottom line was in 2015 financial period when profit surged by 355.61 percent.
Total Nigeria operates in a tough and unpredictable macroeconomic environment, as a rally in oil price since the fourth quarter of 2016 resulted in higher landing costs of the product.
Also, a protracted delay in the payment of subsidy money by the Federal Government is undermining operations since interest on loans are accruing, hence, bloating interest expense in the profit and loss account.
BALA AUGIE
