November 1, 2024/InvestmentOne Report
Overview: TotalEnergies Marketing Nigeria Plc delivered impressive financial results for the nine months ending September 30, 2024, showing substantial revenue growth and improved profitability. The company faced rising operational costs due to elevated energy prices and increased costs related to fuel importation. This report provides an analytical overview of TotalEnergies’ financial performance, highlighting key metrics, drivers, and an outlook in light of current economic conditions.
Revenue Growth: TotalEnergies’ revenue surged by 87.87% to NGN793.90bn for 9M:2024, compared to NGN422.58bn in 9M:2023. The increase in revenue was primarily driven by elevated energy prices and higher fuel importation costs, which led to increased fuel prices in the market. Despite not experiencing a significant increase in petroleum demand, the company capitalized on price adjustments in response to inflationary pressures and foreign exchange volatility. These pricing adjustments enabled TotalEnergies to capture additional revenue amidst Nigeria’s challenging economic landscape.
Cost of Sales and Gross Profit: Total cost of sales rose by 91.04% to NGN700.21bn from NGN366.46bn in 9M:2023, driven by the rising cost of fuel imports and energy prices. The company’s gross profit increased by 67.00% to NGN93.70bn, up from NGN56.12bn in 9M:2023. However, the gross margin slightly declined from 13.28% in 9M:2023 to 11.80% in 9M:2024, reflecting the company’s exposure to heightened costs which somewhat offset the revenue gains. This decrease in gross margin illustrates the impact of external economic factors, including the weaker naira and rising importation expenses.
Operating Profit and Efficiency: TotalEnergies’ profit before tax grew by 151.75%, reaching
NGN41.85bn in 9M:2024 compared to NGN16.62bn in 9M:2023. This significant increase in pre-tax profit is attributed to efficient cost control measures in the face of rising selling and distribution expenses, which rose by 55.43% to NGN45.32bn from NGN29.16bn. Additionally, administrative expenses rose modestly, reflecting TotalEnergies’ focus on containing overhead costs while expanding operational capacity. The company’s ability to achieve a higher operating profit margin amidst rising energy costs demonstrates disciplined expense management.
Finance Costs and Net Profit: Net finance costs for 9M:2024 climbed to NGN11.04bn from
NGN3.34bn in 9M:2023, reflecting a 230.84% increase, primarily due to higher interest expenses from increased reliance on debt financing. Despite the significant rise in finance costs, TotalEnergies achieved a net profit of NGN27.42bn, up 153.38% from NGN10.82bn in 9M:2023. The net profit margin improved from 2.56% in 9M:2023 to 3.45% in 9M:2024, indicating that the company successfully mitigated the impact of elevated costs through strategic price adjustments and efficient resource management.
OUTLOOK
TotalEnergies Marketing Nigeria Plc’s robust performance underscores its resilience in navigating the challenging economic environment in Nigeria. Although rising energy prices and foreign exchange volatility have increased operational costs, the company’s strategic pricing, efficient cost management, and strong cash flows position it well to maintain profitability. As fuel importation costs and inflationary pressures continue to shape the market, we believe the company to be focused on maintaining its market leadership by leveraging operational efficiency and prudent financial management. Moving forward, we expect the company to sustain profitability through disciplined expense control and asset utilization, capitalizing on opportunities as Nigeria’s energy sector adapts to evolving economic conditions. Consequently, we place a NEUTRAL recommendation on Total.
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