Total Nigeria PLC H1 2021 Unaudited Result: Bottom Line Growth, From Bad to Good


Wednesday, August 25, 2021 / 10.00AM / by Tosin Ige, Proshare research/ Header Image Credit: Total Nigeria Plc


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Total Nigeria Plc (NGX: Total) reported a significant half year (H1) 2021 growth in profits attributed to a rise in revenue, a fall in impairment losses, and milder rise in finance costs. Revenue grew by +41.82% year-on-year (Y-o-Y), while Impairment loss on trade receivables declined by -49.59% Y-o-Y and finance cost declined by -56.92% Y-o-Y in H1 2021.


The growth in the company's bottom-line resulted in an interim total dividend of N1.36bn in H1 2021 compared to the absence of a dividend payout in the corresponding period of 2020. Based on the 339,537 ordinary shares of 50kobo each, the company declared an interim dividend of N4.0 per 50kobo share.


Key Highlights

  • Total's gross revenue increased by +41.82% Y-o-Y from N106.70bn in H1 2020 to N151.33bn in H1 2021.
  • Profit before tax grew by +2,348.26% Y-o-Y from -N0.52bn in H1 2020 to N11.78bn in H1 2021.
  • Profit after tax grew by +1,601.45% Y-o-Y from -N0.54bn in H1 2020 to N8.06bn H1 2021.
  • Gross profit increased by +105.67% Y-o-Y from N12.40bn in H1 2020 to N25.50bn in H1 2021.
  • Cost of sales surged by +33.43% Y-o-Y from N94.30bn in H1 2020 to N125.83bn in H1 2021.
  • Finance cost dipped by -56.92% Y-o-Y from N1.95 in H1 2020 to N0.84bn in H1 2021.
  • Income taxation rose by +1,529.54% Y-o-Y from -N0.26bn in H1 2020 to N3.71bn in H1 2021.
  • Selling and distribution expenses declined slightly by -3.97% Y-o-Y from N1.67bn in H1 2020 to N1.61bn in H1 2021.
  • Total debt grew by +7.14% Y-o-Y in H1 2021 from N31.05bn in H1 2020 to N33.26bn.
  • Total assets increased by +48.12% Y-o-Y from N126.18bn in H1 2020 to N186.90bn in H1 2021.
  • Net Assets increased by +28.68% Y-o-Y from N25.51b in H1 2020 to N32.82bn in H1 2021.
  • Earnings per share grew significantly by +1,603.8% Y-o-Y from -N 1.58 in H1 2020 to N23.76 in H1 2021.

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Total's Share Price against Industry Index

Total's share prices have maintained a bullish trend, reaching a resistance level of N203.3 in the last 3 weeks. Investors have shown buying interests in the company's share lately as prices continue to trend upward.


The share prices moved between a 28-week high of N145 and a 28-week low of N130 through H1 2021. The shares are currently selling 53.2% higher than the low price at N199.20 per share on the NGX trading floor. Over the past 3-weeks, Total's 21-day average share prices have gone up to N201.87.


Total's share prices have been trading below the NGX oil and gas industry index throughout the period under review (See chart 1 below). Over the 36 weeks under review, the gap between the industry index and the company share prices have widened from N96.41 to over N174 year-to-date (YTD). This can be attributed to the presence of other stronger shares in the industry. Analysts believe sustained buying interest in the Total's shares would narrow the gap in H2 2021.


Chart 1: Total Share Price Movement against Industry Index

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Share price and volume as of 20 August 2021.

Source: NGX, Proshare Research


Revenue and Profitability: Bullish Reversals


The growth in revenue by +41.82% Y-o-Y from N106.70bn in H1 2020 to N151.33bn in H1 2021 have pushed the company sales above its pre-pandemic level by +0.33% from N150.83 in H1 2019. The growth in H1 revenue was majorly driven by a +132.11% Y-o-Y growth in Q2 2021 revenue compared with a -5.05% Y-o-Y decline in revenue in Q1 2021 (See chart 2 below).


When disaggregated further, petroleum products, which accounted for 75% of total revenue, grew by +36.2% from N83.74billion in H1 2020 to N114.04billion in H1 2021. Lubricants and others, which accounted for 25% of revenue, grew by +62.3% from N22.96billion in H1 2020 to N37.3billion in H1 2021. This questions the energy transition drive of the company.


The company also recorded positive growth across the sales segments: 56% growth in sales to service stations, 34% growth in sales to corporate customers, and 10% growth in sales to the aviation industry.


Chart 2: Total Total Revenue H1 2015 - H1 2021 (N'bn)

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Source: Total Financial Statement, Proshare Research


Profit Before Tax

The downstream oil marketer' profit before tax (PBT) rose significantly by +2,348.26% Y-o-Y having recorded a negative PBT of N0.52bn in H1 2020 but a staggering PBT of N11.78bn in H1 2021 (See chart 3 below). This increase signals improved performance of the company in Q1 and Q2 2021 where PBT grew by +3,276.05% Y-o-Y and +2,019.73% Y-o-Y respectively. Meanwhile, profit after tax (PAT) also closed the period with N8.06bn, a sharp rebound from a loss of N0.54bn recorded in the corresponding period of 2020.


Chart 3: Total Profit Before Taxation H1 2015 - H1 2021 (N'bn)

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Source: Total Financial Statement, Proshare Research

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Asset Quality-Chilly Operations

Current Ratio

The company's current ratio grew by +13.32% Y-o-Y from 0.84 in H1 2020 to 0.94 in H1 2021, falling below analysts preferred current ratio of 2:1 but an improvement above the immediate pre-pandemic ratio (See chart 4 below). The company has had difficulties managing its resources to meet short-term liabilities, as growing liabilities to offset short-term assets. However, with operating improvements in H1 2021, the company should see notable growth in H2.


Chart 4: Total Current Ratio H1 2015 - H1 2021

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Source: Total Financial Statement, Proshare Research


Liquidity Ratio

The company's liquidity ratio grew significantly in H1 2021 to 30.18% from 4.66% in H1 2020, the highest it has recorded in the last seven years. The implication is that the company can increasingly meet its debt obligations in H1 2021 without further external funding (See chart 5 below).


Chart 5: Total Liquidity Ratio H1 2015 - H1 2021 (%)

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Source: Total Financial Statement, Proshare Research


Acid-Test Ratio

The company's acid-test ratio, a stricter measure of corporate liquidity, showed that Total recorded its highest ratio in H1 2021 at 76.86%. The high ratio reflects the relative significance of inventory in the company's asset portfolio compared with its current ratio at 30.18%. For instance, the company's inventory grew by +59.26% Y-o-Y in H1 2021. This suggests that the company need to drawdown its inventory level rather than build it in H2 2021 (See chart 6 below). 


Chart 6: Total Acid-Test Ratio H1 2015 - H1 2021

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Source: Total Financial Statement, Proshare Research

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Leverage Ratio

Total's leverage ratio dipped slightly from 122% in H1 2020 to 101% in H1 2021. This suggests that over 100% of the company's operations were funded with debts while shareholders' equity accounted for a negligible proportion. The company's debt-to-equity ratio reached its highest level in H1 2019 at 201%.  (See chart 7 below). This also underscores the fact that the company is exposed to financial risk and more needs to be done to hedge its exposure. 


Chart 7: Total Leverage Ratio H1 2015 - H1 2021 (%)

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Source: Total Financial Statement, Proshare Research


When Efficiency Matters


Total Asset Turnover

Total asset turnover of Total Nigeria improved slightly from 0.82 in H1 2022 to 0.92 in H1 2021. The company has recorded a steady decline in asset efficiency over the years (See chart 8 below).  The total asset turnover of 0.92 recorded in H1 2021 implies that for every N1 the company invested in asset, it generates revenue worth N0.92. This emphasizes the need for the company to strengthen its asset efficiency back to the pre-pandemic level in full year 2021.


Chart 8: Total Plc's Asset Turnover H1 2015 - H1 2021

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Source: Total Financial Statement, Proshare Research


Getting Back from Fear to Hope

Total Nigeria's revenue and profits returned to a pre-pandemic level in H1 2021. The growth across top and bottom-line items could be attributed to recovery in factory throughputs and mobility as the world recovers from the COVID-19 pandemic. Nevertheless, the evolution of the more dangerous delta variant of the coronavirus may cap the current earnings growth trajectory of Total Nigeria. The fact that the company seems not to have done anything differently to hedge against the volatility of the oil market, could be a source of concern to investors in the company.


Overall, as oil prices remain high and economic activities continue it returns to the pre-pandemic levels, the analysts forecast a revenue growth rate of 47.8% for Total Nigeria's full year 2021. This will further support growth in the bottom-line figures. Nonetheless, the revenue growth for FY 2021 is subject to the company's asset quality and efficiency management.


The trend in the global oil market is the transition of International Oil Companies from fossil fuels to achieve carbon neutrality. This has also driven the Nigerian government to launch a National Gas Expansion Programme to deepen gas use as substitute fuel. Total Nigeria seems on the transition to gas in H1 2021. Analysts have maintained their concerns that the company only has aspirations to be a key partner to the federal government on the National Gas Expansion Programme without making the required investment for the transition.

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