Thursday, March 16, 2016/ 9.33 AM / NSE
Implications: Slight changes to consensus 2017 estimates expected
Positives: Q4 sales of N70.7bn up 45% y/y; PBT and PAT both up 116% y/y and 148% y/y respectively
Negatives: Fx loss of –N15bn and -N9.1bn printed in Q4 and FY 2016 respectively; proposed dividend of N7.00 came in well behind consensus expectation
Late yesterday, Total Nigeria (Total) reported Q4 2016 results which showed that while sales grew 45% y/y, PBT and PAT were both up strongly, by 116% y/y and 148% y/y. According to management statements, a breakdown by segments revealed that sales from service stations (Retail), which accounted for around 75% of group sales, were up by 39% y/y to N53.6bn. Additionally, sales for the Aviation and Corporate (referred to as General Trade) segments were also up, by 78.1% and 67.7% respectively to N12.3bn and N4.9bn. A gross margin expansion of 1,171bps y/y to 24.2% and a 47% y/y reduction in net finance charges led to the strong y/y PBT growth. PAT growth came in much stronger due to a lower tax rate of 6% vs. 18% in the corresponding period of 2015. Gross margin expanded across all segments with General Trade and Aviation segments expanding by 2,779bp y/y and 2,554bp y/y to 32% and 31% respectively. Gains from Total’s fx supply agreement with Total Upstream, a related company, were realised yet again. Given that the independent marketers struggled to source fx for imports during the period, we suspect that major marketers, especially firms with related exploration & production entities, continue to gain market share. The situation also provides Total with some level of pricing flexibility, especially within the corporate segment where gross margin expanded the most. Total posted a loss of –N8.4bn on the other income line on the back of a –N15bn fx revaluation loss. Due to the magnitude of the loss, we await management comments. Sequentially, while sales and PBT declined by -6% q/q and -18% q/q, PAT was up 17% y/y on the back of a lower tax rate. For full year, both sales and PAT were up, by 40% y/y and 266% y/y respectively. Improved profitability was driven by gross margin expansion, flattish opex and a significantly decline in net finance charges.
Compared with our estimates, while Q4 sales and PBT were behind by 6% and 9% respectively, PAT was ahead by 42% due to a positive surprise on the tax line. Full year sales and PBT were both in line with our forecasts while PAT beat by 7%. Compared with consensus estimates, sales beat by 3% while PAT was broadly in line.
Total declared a final dividend of N7.00 (total dividend of N17.00) which is rather disappointing given the strong earnings growth recorded. This works out to a dividend payout of just 39%, the lowest in over two decades. We forecasted a final dividend of N26.00 (consensus N19.00). Year to date, Total shares have declined -6%, broadly in line with NSE ASI. We rate the stock Underperform.
1. Total Nigeria Q3 2016 Results Review - Underperform Rating Maintained