October 29, 2021/Cordros Report

TOTAL published its Q3-21 results earlier today, reporting Q3-21 standalone EPS of NGN15.67 (Q3-20: NGN3.06) and 9M-21 EPS of NGN39.43 (9M-20: NGN1.47). Adjusting for net foreign exchange gain, the company reported an EPS of NGN10.16, bringing the 9M-21 adj. EPS to NGN33.91.

Revenue in the period grew by 102.0% y/y to NGN90.89 billion – the highest Q3 topline outturn – reflecting (1) the increase in demand from last year’s pandemic induced slump, (2) TOTAL’s volume drive in 2021FY and (3) higher product prices (Average PMS price: NGN165.22/litre in Q3-21 vs NGN151.15/litre in Q3-20; Average DPK price: NGN410.58/litre in Q3-21 vs NGN343.35/litre in Q3-20; Average AGO price: NGN253.22/litre in Q3-21 vs NGN222.00/litre in Q3-20). Accordingly, substantial increases were recorded across the business segments – (Network: +19.2% y/y; General Trade: +146.2% y/y; Aviation: +166.1% y/y).

On a q/q basis, revenue increased by 7.4%, with all business segments – Network (+14.6%) and General Trade (+7.7%) – save for the Aviation segment (-18.4%), recording growth.

Gross margin (-258bps) declined to 16.6% in Q3-21 (Q3-20: 19.2%) as the uptick in crude oil prices (Average Brent price: USD73.23/bbl in Q3-21 vs USD43.34/bbl in Q3-20) led to a faster increase in the cost of sales (108.4% y/y) than revenue. Notwithstanding, adj. EBITDA (+68bps) and adj. EBIT (+244bps) margins came in higher at 8.8% and 6.9%, respectively, facilitated by a 616bps decline in TOTAL’s OPEX margin to 8.9% (Q3-20: 15.1%).

Net finance costs fell by 67.8% y/y, following a 29.3% y/y reduction in finance costs and a 406.7% y/y surge in finance income. We attribute the decrease in finance costs to TOTAL’s less reliance on overdrafts to finance working capital, as disclosed by management in their 2020 Investor Presentation. Thus, overdraft financing as of 9M-21 declined by 92.9% y/y to NGN133.32 million (9M-20: NGN1.88 billion).

Overall, the company recorded an adj. PBT of NGN6.07 billion in the period (vs PBT of NGN1.44 billion in Q3-20). A NGN2.62 billion tax expense resulted in adj. PAT of NGN3.45 billion in the period (vs PAT of NGN1.04 billion in Q3-20).

Comment: TOTAL’s performance is laudable as earnings have continued to show strong resilience, majorly driven by the company’s strong volume play so far in 2021FY. We like that the company has sustained its drive to lower finance costs which was a major drag on earnings in the pre-pandemic era. We expect the reinstatement of the PMS price cap and expected cost pressures following the resilience in crude oil prices to inhibit gross margin increase in the last quarter of the year. We envisage a positive reaction from investors in today’s trading. Our estimates are under review.

*Adj = Adjusted **Adjusted = removal of non-recurring/one-off items