July 30, 2024/Cordros Report

TotalEnergies Marketing Nigeria Plc (TOTAL) published its Q2-24 unaudited results yesterday, reporting EPS of NGN26.71 (Q2-23: NGN13.62), translating to a 96.1% y/y growth. Thus, H1-24 EPS printed NGN60.58 (H1-23: NGN25.88). The EPS growth was driven mainly by substantial revenue growth (+86.7% y/y) during the period, supported mainly by higher product pricing.

Revenue grew by 86.7% y/y driven by substantial growth across all business segments: Network (+71.3% y/y | 54.0% of revenue), General Trade (+110.0% y/y | 35.0% of revenue) and Aviation (+104.8% y/y | 11.0% of revenue). An increase in product prices underpinned the strong performance; we note that higher PMS (+114.0% y/y), diesel (+71.1% y/y) and kerosene (+20.5% y/y) prices supported the outturn. On a q/q basis, revenue declined by 3.6%.

Gross margin declined by 311bps y/y to 11.3% in Q2-24 (H1-24: -60bps y/y to 12.2%), reflecting increased cost pressures. Precisely, the cost of sales grew by 93.5% y/y, with cost to sales ratio rising to 88.7% (Q1-24: 87.0% | Q2-23: 85.6%), reflecting the impact of FX devaluation and the highly inflationary environment. Specifically, the numbers show increases in net changes in inventory of lubes, greases and refined products (+89.2% y/y), customs duties (+404.8% y/y) and transportation costs (+225.4% y/y).
 
Consequently, EBITDA (-73bps y/y) margin contracted to 6.5%, compounded by the 60.7% y/y expansion in operating expenses.
 
Net finance costs increased by 128.8% y/y to NGN2.59 billion in Q2-24 (H2-24: +122.9% y/y to NGN1.99 billion), attributable to a 164.2% y/y surge in finance cost. Interest on other loans increased by 54.9% y/y to NGN2.22 billion, interest on lease liability increased by 93.0% to NGN90.97 million and interest on bank overdraft settled at NGN5.07 billion in H1-24. As of H1-24, TOTAL’s total debt stood at NGN82.73 billion (2023FY: NGN 84.54 billion).

Overall, profit before tax increased by 94.7% y/y to NGN13.73 billion in Q2-24 (Q2-23: NGN7.05 billion). Profit after tax surged by 96.1% y/y to NGN9.07 billion in Q2-24 (Q2-23: NGN4.62 billion).

Comment: The impact of petrol subsidy removal has lingered even as cost pressures remain abated, with most of the pressure stemming from currency devaluation. While we expect the impact of FX devaluation to tamper down as the CBN intervenes and achieves stability in the market, we still expect TOTAL to remain resilient, benefitting from its broad reach in the market.