Culled—Proshare
APRIL 26, 2017/FBNQuest Research
Event: Total Nigeria (Total) reports Q1 2017 results
Implications: Cuts to consensus 2017E estimates expected
Positives: Q4 sales of N80.5bn up 35% y/y and PBT up 11% y/y to N4.3bn
Negatives: Gross margin contracted -371bps y/y to 11.2%; PAT declined -5% y/y due to a relatively higher tax rate of 37.1%
This afternoon, Total Nigeria (Total) reported Q1 2017 results which showed that while sales and PBT grew by 35% y/y and 11% y/y respectively, PAT declined by -5% y/y to N2.7bn. Sales were boosted by a 63% y/y growth in lubricant sales. White products sales were up 30% y/y to N67.4bn and accounted for c.83% of Total’s topline, down from 87% a year ago.
According to management statements, a breakdown by segments revealed that sales from service stations (Retail), which accounted for around 71% of group sales, were up by 28% y/y to N57.0bn. Additionally, sales for the Corporate Customer (referred to as General Trade) segment were up 97% to N19.8bn. Growth in both businesses offset the y/y decline in the Aviation business, which was down -82% y/y to N3.7bn.
Although Total’s gross margin contracted by -371bps y/y to 11.2%, this was not enough to offset benefits coming through from the topline growth. Opex came in flattish y/y at N5.2bn. Total posted an fx revaluation gain of N371m vs. a –N15bn fx-related loss in Q4 2016.
However, PAT declined by -5% y/y because of a relatively higher tax rate of 37.1% compared with 26.5% in the corresponding quarter of 2016. Sequentially, the trend is similar as sales and PBT both grew 14% q/q and 27% q/q respectively, while PAT declined by -16% q/q. Again a relatively higher tax rate compared with Q4 2016 is responsible for the y/y earnings decline. The q/q gross margin contraction was more significant at -1298bps q/q.
Compared with our estimates, while sales were ahead by 26%, PAT beat by only 5% due to negative surprises on the gross margin line which partially offset positives on the opex, finance expense and other income lines. On an annualised basis, Total pre-tax profit of N4.3bn is tracking behind consensus PBT estimate of N20.9bn. As such, we expect downward revisions to consensus 2017E estimates. Year to date, Total shares have declined -12% underperforming the NSE ASI by 7%. We rate the stock Neutral.
Total Nigeria Q1 2017 results: actual vs. FBNQuest Research estimates (N millions)
| Q1 2017 | |||||
| Actual | Y/y | Q/q | FBNQuest est. | Actual vs FBNQuest est. (%) | |
| Sales | 80,463 | 34.8% | 13.8% | 63,884 | 26.0% |
| cost of sales | -71,463 | 40.6% | 33.2% | -54,302 | 31.6% |
| Gross profit | 8,999 | 1.2% | -47.3% | 9,583 | -6.1% |
| -gross margin | 11.2% | -371bps | -1298bps | 15.0% | -382bps |
| Operating expenses | -5,223 | 0.7% | 5.0% | -6,069 | -13.9% |
| Other income | 687 | 125.5% | -108.2% | 458 | 50.1% |
| Operating profit | 4,464 | 11.3% | 20.8% | 3,971 | 12.4% |
| Net int. and similar chgs | -213 | 28.6% | -38.4% | -230 | -7.5% |
| PBT | 4,250 | 10.6% | 26.9% | 3,741 | 13.6% |
| -PBT margin | 5.3% | -115bps | 55bps | 5.9% | -57bps |
| Tax | -1,579 | 55.0% | 757.7% | -1,197 | 31.9% |
| Tax rate | 37.1% | 0bps | 3165bps | 32.0% | 515bps |
| PAT | 2,672 | -5.4% | -15.6% | 2,544 | 5.0% |
| -PAT margin | 3.3% | -141bps | -115bps | 4.0% | -66bps |
| Other comprehensive income | 0 | n/a | n/a | 0 | n/a |
| Total comprehensive income | 2,672 | -5.4% | -15.6% | 2,544 | 5.0% |
Source: NSE, FBNQuest Research estimates
