April 4, 2023/InvestmentOne Report

• Gross revenue of N482.47billion, up 13.35%q/q, up 41.36%y/y         
• Gross Profit of N60.18billion, up 4.50%q/q, up 9.43%y/y.
• Profit before tax of N24.53billion, down 0.84%q/q, down 1.22% y/y.
• Profit after tax of N16.12billion, down 1.26%q/q, down 4.41%y/y.
  

Last week, TotalEnergies Marketing Plc published its FY 2022 audited financial report which revealed that revenue grew (+41.36% y/y) to N482.47 billion for full-year 2022 compared to N341.32 billion recorded in 2021. There was significant growth recorded across the three revenue segments, i.e., Network (+25.35% y/y), General trade (+48.00% y/y) and Aviation (+97.00% y/y). The largest contribution was from the increase in sales of both Petroleum Products (+22.17% y/y) and Lubricants and others (+32.60% y/y) to the network segment. We attribute the growth in revenue to price increases in fuel products caused by the geopolitical tensions and the intermittent fuel scarcity. Elsewhere, cost of sales significantly increased (+47.49% y/y) to N422.29 billion in 2022 compared to N286.32 billion in 2021, driven by significant surge in inventory cost (+102.98% y/y). Thus, gross profit margin declined by -3.64% y/y to 12.47%, as the increase in input cost surpassed the revenue growth. 

Moving down the P&L, administrative expense and selling & distribution costs increased by 7.23% y/y and 14.57% y/y while other income declined (-22.25% y/y) due to a significant decrease in net foreign exchange gains (-96.68% y/y). Nonetheless, operating profit increased (+7.34% y/y) to N27.67 billion in 2022 from N25.77 billion in 2021 which can be attributed to the positive impact of N40.19 million made from financial assets in 2022. 

Elsewhere, net finance cost expanded by 234.03% to N3.14 billion in 2022 from N938.62 million in 2021, as finance cost (+204.70% y/y) outweighed finance income (+171.58% y/y). As such, profit before tax declined (-1.22% y/y) to N24.53 billion in 2022 while profit after tax followed suit by 4.41% y/y to N16.11 billion in 2022. 

Outlook: Total’s financial performance remained resilient, regardless of the high cost of sales. Going forward, we believe that the anticipated petrol deregulation/subsidy removal should further support the company’s revenue in the near term. However, the elevated inflationary pressures and the significant finance cost are a downside risk to bottom line performance.