October 26, 2018/Cordros Report
TOTAL recently published 9M-2018 results, showing top-line grew 2.6% y/y to NGN226.91 billion, while net profit climbed 28.7% to NGN7.67 billion, translating to an EPS of NGN22.58 (9M-17: NGN17.54).
- Improvement in revenue was underpinned by increases in sales from the Aviation (+64.2% y/y) and General Trade (+21.4% y/y) segments, which indicates a positive product mix shift — product pricing in these segments are largely deregulated — amidst higher global oil prices. Looking at products specifically, revenue from both petroleum products (+1.8% y/y) and Lubricants and others (+6.7% y/y) both grew, with contribution to total revenue now at 83.0% and 17.0%, respectively, compared to 83.7% and 16.3% in 9M-17.
- Gross margin expanded 343bps y/y to 13.6% in the period, as the growth in revenue combined with reduction in cost of sales (-1.3% y/y), led to an increase in gross profit by 37.0% y/y to N30.97billion, positively impacting margin. Accordingly, margins expanded across the business segments — Network to 14.6% (+360bps), General Trade to 13.1% (+226bps) and Aviation to 8.4% (+1,009 bps) – with revenue expanding at faster pace than COGS for the latter two segments, and COGS contracting quicker than revenue for the former.
- Despite the decline in other income (-68.7% y/y to NGN1.05 billion) and the expansion in OPEX (+8.9% y/y to NGN17.80 billion), EBIT and its margin grew by 47.8% and 192 bps y/y to NGN14.23 billion and 6.3%, respectively, boosted by growth in gross profit.
- Net finance cost came in at NGN2.79 billion, from NGN50million net finance income in the previous year, reflecting (1) a 38.5% surge in interest expense on bank overdrafts and loans to NGN3.02billion, and (2) the absence of finance income from the forex differential on Petroleum Subsidy Fund (PSF). Outstanding debt stood at NGN35.68 billion during the period compared to NGN12.48billion as at H1-2018, following a 327% increase in the company’s overdraft facilities to NGN29.61 billion.
- TOTAL’s PBT came in at NGN11.44 billion (+18.22% vs. 9M-17). A tax charge of NGN3.77 billion yielded an effective tax rate of 33.0%, compared to 38.5% in 9M-17, which drove a 28.7% y/y growth in PAT to N7.67 billion.
- The Board has proposed an interim dividend of NGN3.00 per share. Year-to-Date, TOTAL (-13.9%) has underperformed the Oil & Gas Index (-10.5%) but outperformed the broader All Share Index 14.9%).
Comment: Overall, TOTAL’s latest result is impressive in our view, and we expect positive investor reaction to follow. NOT RATED. Ongoing initiation.
| Income Statement (N’bn) | 30-Sep-18 | 30-Sep-17 | y/y % ∆ | q/q% ∆ | Q3-2018 | Q2-2018 | Q1-2018 |
| Revenue | 226.91 | 221.20 | 2.6% | -12.4% | 70.65 | 80.62 | 75.65 |
| Cost of Sales | -195.94 | -198.59 | -1.3% | -10.0% | -60.91 | -67.71 | -67.32 |
| Gross profit | 30.97 | 22.60 | 37.0% | -24.6% | 9.73 | 12.91 | 8.33 |
| Other Income | 1.05 | 3.36 | -68.7% | 37.5% | 0.25 | 0.18 | 0.62 |
| Forex Revaluation Gain | – | 2.59 | -100.0% | ||||
| OPEX | -17.80 | -16.34 | 8.9% | -3.6% | -5.94 | -6.16 | -5.70 |
| EBIT | 14.23 | 9.63 | 47.8% | -41.7% | 4.05 | 6.94 | 3.24 |
| Finance income | 0.23 | 2.24 | -89.6% | -5.5% | 0.08 | 0.08 | 0.07 |
| Finance cost | -3.02 | -2.18 | 38.5% | 32.5% | -1.33 | -1.00 | -0.69 |
| Net finance cost | -2.79 | 0.05 | 35.9% | -1.25 | -0.92 | -0.61 | |
| Profit before tax | 11.44 | 9.68 | 18.2% | -53.6% | 2.79 | 6.02 | 2.63 |
| Taxation | -3.77 | -3.72 | 1.4% | -60.1% | -0.80 | -2.01 | -0.96 |
| Profit after tax | 7.67 | 5.96 | 28.7% | -50.3% | 1.99 | 4.00 | 1.67 |
| Ratios | 30-Sep-18 | 30-Sep-17 |
|
| Q3-2018 | Q2-2018 | Q1-2018 |
| Gross margin | 13.6% | 10.2% | 13.8% | 16.0% | 11.0% | ||
| OPEX margin | 7.8% | 7.4% | 8.4% | 7.6% | 7.5% | ||
| EBIT margin | 6.3% | 4.4% | 5.7% | 8.6% | 4.3% | ||
| PBT margin | 5.0% | 4.4% | 4.0% | 7.5% | 3.5% | ||
| PAT margin | 3.4% | 2.7% | 2.8% | 5.0% | 2.2% | ||
| Cost of sales margin | 86.4% | 89.8% | 86.2% | 84.0% | 89.0% | ||
| Interest cover | 4.71x | 4.41x | 3.04x | 6.91x | 4.72x | ||
| Tax rate | 33.0% | 38.5% | 28.7% | 33.4% | 36.5% |
