November 1, 2024/Cordros Report
TotalEnergies Marketing Nigeria Plc (TOTAL) published their Q3-24 unaudited result yesterday (31 October), reporting standalone EPS of NGN20.19 in Q3-24 (Q3-23: NGN5.99), thus, bringing 9M-24 EPS to NGN80.77 (9M-23: NGN31.87). The EPS growth was driven by substantial revenue growth (+78.4% y/y) during the period.
Revenue grew by 78.4% y/y due to the broad-based expansion across all business segments – Network (+78.4% y/y | 53.0% of revenue), General Trade (+78.4% y/y | 33.0% of revenue) and Aviation (+78.4% y/y | 14.0% of revenue). We note that the surge in petroleum product prices supported the strong performance as PMS (+42.0% y/y), diesel (+65.6% y/y) and kerosene (+45.5% y/y) prices grew significantly. On a q/q basis, revenue increased marginally by 1.5%.
Gross margin declined by 316bps y/y to 11.1% in Q3-24 (9M-24: -148bps y/y to 11.8%), reflecting increased cost pressures. The cost of sales grew by 84.9% y/y; specifically, the numbers show increases in net changes in inventory of lubes, greases and refined products (+78.2% y/y) and customs duties (+147.4% y/y).
Consequently, EBITDA (+83bps y/y) and EBIT (+374bps y/y) margins expanded to 7.7% and 6.8%, respectively, due to the significant increase in other income (+678.4% y/y to NGN9.58 billion) amid a 57.2% y/y expansion in operating expenses. Notably, selling & distribution expenses increased by +128.2% y/y, influenced by the highly inflationary environment.
Net finance costs increased by 388.8% y/y to NGN6.61 billion in Q3-24, attributable to a 244.4% y/y surge in finance cost. This surge was driven by a significant rise in interest on bank overdrafts (+21.3x y/y to NGN5.43 billion), interest on lease liabilities (+781.2% y/y to NGN207.67 million), and interest on import loans (+178.0% y/y to NGN2.82 billion). In contrast, interest on other loans decreased by 122.3% y/y to NGN246.07 million in Q3-24. On the other hand, finance income surged by 55.6% y/y to NGN1.61 billion.
Overall, profit before tax increased by 258.6% y/y to NGN11.28 billion in Q3-24 (Q3-23: NGN3.15 billion). After accounting for a tax expense of NGN4.43 billion (39.2% effective tax rate), profit after tax surged by 237.1% y/y to NGN6.85 billion in Q3-24 (Q3-23: NGN2.03 billion).
Comment: TOTAL’s numbers came in as expected with topline growing markedly, highlighting the impact of higher PMS price, even as, cost pressures remain sticky. However, we are concerned that earnings in the quarter was propped by a one-off writeback on charges for no longer required technical services, following the substantial growth in operating expenses (+57.2% y/y). The performance booked, particularly in H1-24, would ensure TOTAL ends the year positively. Nonetheless, we cite that lower product demand amid constantly increasing prices presents a headwind for the foreseeable future. Our estimates are under review.
