Culled—-Proshare
July 28, 2017/FBNQuest Research
Event: Total Nigeria (Total) reports Q2 2017 results
Implications: Cuts to consensus 2017E estimates expected
Positives: Q2 sales, PBT and PAT all declined, by -16% y/y, -66% y/y and -68% y/y respectively
Negatives: No obvious positives
This afternoon, Total Nigeria (Total) reported Q2 2017 results which showed declines across all key P&L line items. While sales of N72.5bn declined -16% y/y, PBT and PAT of N3.1bn and N1.9bn both declined by slightly below 70% y/y.
These y/y declines are unsurprising given the strength of Total’s Q2 2016 performance, a period the firm, as well as other major marketers, benefitted from the FG’s fx preferential treatment. The topline decline was driven by a high single-digit y/y fall in sales to N55.7bn at service stations.
This along with a gross margin contraction of -623bp y/y more than offset positives coming through from a much improved other income line. Other income was buoyed by fx-related gains of N1.3bn. Sequentially, the trend was similar to the y/y ones, with declines across all key lines. While sales declined -10% q/q, both PBT and PAT were down -28% q/q.
Compared with our estimates, while sales beat by 6%, PBT was behind by around 7%. A positive surprise on the other income line was offset by a weaker-than-expected gross margin outcome. On an annualised basis, Total’s H1 2017 PAT is tracking behind consensus N10.5bn forecast. As such, we expect downward revisions to consensus 2017E estimates. Year to date, Total shares have declined -10%, underperforming the NSE ASI by 47%. We rate the stock Neutral.
Total Nigeria Q2 2017 results: actual vs. FBNQuest Research estimates (N millions)
| Q2 2017 | H1 2017 | ||||||||||
| Actual | Y/y | Q/q | FBNQuest est. | Act. vs FBNQuest est (%) | Actual | Y/y | FBNQuest est. | Act. vs FBNQuest est (%) | |||
| Sales | 72,510 | -15.5% | -9.9% | 68,622 | 5.7% | 152,972 | 5.1% | 149,084 | 2.6% | ||
| cost of sales | -65,183 | -9.2% | -8.8% | -60,387 | 7.9% | -136,647 | 11.5% | -131,850 | 3.6% | ||
| Gross profit | 7,326 | -47.7% | -18.6% | 8,235 | -11.0% | 16,326 | -28.7% | 17,234 | -5.3% | ||
| -gross margin | 10.1% | -623bps | -108bps | 12.0% | -190bps | 10.7% | -507bps | 11.6% | -89bps | ||
| Operating expenses | -5,280 | 3.3% | 1.1% | -5,147 | 2.6% | -10,502 | 1.97% | -10,370 | 1.3% | ||
| Other income | 1,550 | 1162.6% | 125.5% | 395 | 292.4% | 2,237 | 423.3% | 1,082 | 106.7% | ||
| Operating profit | 3,596 | -60.2% | -19.4% | 3,483 | 3.3% | 8,060 | -38.2% | 7,946 | 1.4% | ||
| Net int. and similar chgs | -533 | n/a | 150.0% | -179 | 198.3% | -746 | 680% | -392 | 90.4% | ||
| PBT | 3,063 | -66.3% | -27.9% | 3,304 | -7.3% | 7,314 | -43.5% | 7,554 | -3.2% | ||
| -PBT margin | 4.2% | -638bps | -106bps | 4.8% | -59bps | 4.8% | -411bps | 5.1% | -29bps | ||
| Tax | -1,128 | -62.2% | -28.5% | -1,057 | 6.7% | -2,707 | -32.4% | -2,636 | 2.7% | ||
| Tax rate | 36.8% | 401bps | -32bps | 32.0% | 483bps | 37.0% | 607bps | 34.9% | 212bps | ||
| PAT | 1,935 | -68.3% | -27.6% | 2,247 | -13.9% | 4,607 | -48.4% | 4,918 | -6.3% | ||
| -PAT margin | 2.7% | -445bps | -65bps | 3.3% | -61bps | 3.0% | -313bps | 3.3% | -29bps | ||
| Other comprehensive income | 0 | n/a | n/a | 0 | n/a | 0 | n/a | 0 | n/a | ||
| Total comprehensive income | 1,935 | -68.3% | -27.6% | 2,247 | -13.9% | 4,607 | -48.4% | 4,918 | -6.3% | ||
Source: NSE, FBNQuest Research estimates
