TOTAL OIL NIGERIA PLC: Significant growth in top-line and bottom-line earnings despite macro-economic challenges

IN ADDITION, WE EXPECT THE MODEST LEVERAGE IN THE BOOK OF THE COMPANY TO ALLOW IT SIGNIFICANT ROOM FOR BALANCE SHEET OPTIMISATION AND IMPROVED EARNINGS PER SHARE TOWARDS ENSURING MAXIMIZATION OF SHAREHOLDERS RETURN IN THE DAYS AHEAD would be eroded. In ad

Total Nigeria Plc is a Marketing and Services subsidiary of Total; a multinational energy company operating in more than 130 countries and committed to providing sustainable products and services for its customers. For over 50 years, Total Nigeria Plc has remained the leader in the downstream sector of the Nigerian oil and gas industry with an extensive distribution network of over 500 service stations nationwide and a wide range of top quality energy products and services. Total Nigeria Plc (RC 1396) was incorporated as a private company on September 1, 1956 to market petroleum products in Nigeria. In December 11, 2001, the company had a successful merger which paved way for sustainable growth and continuous development. Total Oil Nigeria Plc recently released its third quarters result for the period ended September 30th 2016, showing significant increase in key performance indicators despite the tough operating business climate in Nigeria.

TURNOVER IMPROVES DESPITE HIGH INFLATION AND DECREASE IN PRICE OF CRUDE OIL

Total Oil Plc reported a 38.24% increase in revenue to N220.22 billion in September 2016 from N159.30 billion in the corresponding period of 2015. Despite the challenging global and domestic oil market quagmires during the period, Total Nigeria Plc was able to record a magnificent rise in revenue. Most Nigerian oil marketers struggled to grow revenue during the first quarter due to the sharp drop in petroleum product supply following the rise in importation cost and scarcity of foreign exchange which resulted into the sudden upward review and partial deregulated of prices of petroleum in domestic market. Costs of sales, therefore, grew by 33.84% to N188.21 billion in September 2016 from N140.61 billion in September 2015. The Company recorded a massive rise of 71.32% in gross profit to N32.01 billion in September 2016 from N18.69 billion in the

corresponding year of 2015, EFFECTIVE COST MANAGEMENT LEADS TO FURTHER INCREASE IN PROFITABILITY

For the third quarter period ended, September 30th 2016, Total Nigeria Plc’s selling and distribution expenses increased by 15.42% to N3.96 billion in September 2016 from N3.43 billion recorded in the corresponding year in 2015. Over the last few years, the company has improved its effort to curtail increase in operational costs due to high overhead cost ranging from the cost of delivering its supplies through trucking to all its retails outlets and others. Impressively the Company was able maintain personnel costs, advertisement and promotion expenses as well as depreciation. Rise in selling and distribution expenses was recorded due to increase in: changes in inventory of lubes, greases and refined products, custom duties, transportation of supplies and maintenance expenses. Also, the Company’s management succeeded in curtailing its administrative expenses which declined by 3.14% to N11.63 billion from N12.00 billion reported in September 2015. Furthermore, Total Oil recorded a marginal rise of 0.91% in other income to N814m in September 2016 from N807m over the corresponding year of 2015. Hence, operating profit for the year as anticipated grew substantially to N17.24 billion in September 2016 from N4.05 billion in September 2015, indicating an enormous growth of 325.08%.

PROFITABILITY SOARS HIGHER AS FINANCE COST DEPLETES

Financial income decreased notably by 87.06% to N277m from N2.14 billion while finance cost recorded similar feat as it dropped by 59.24% to N509m in September 2016 from N1.25 billion in September 2015. Therefore, net finance cost decreased massively by 126.05% to N232m from N891m over the period. Hence, profit before tax and net income for the period grew substantially by 243.75% to N17.00 billion and by 319.91% to N11.63 billion in third quarter 2016 from corresponding figures of N4.95 billion and N2.77 billion respectively.

STRONG ASSET QUALITY

Total Oil Plc reported an increase of 39.39% in total asset to N116.60 billion as at September 2016 from N83.65 billion as at December 2015 while its total liabilities grew by 39.18% to N93.82 billion in September 2016 from N67.41 billion in December 2015. The increase in total assets is attributable to: 96.07% rise in other receivables, 140.33% increase in inventories and a 63.98% in cash and bank balances; while on the flip side, rise in total liabilities is attributable to: 73.78% increase in trade and other payables and an increment of 200.10% in current tax liabilities. Also, shareholders fund rose significantly by 40.26% to N22.78 billion from N16.24 billion over the period. The company’s profitability and efficiency ratios rose significantly. Return on asset (ROA) increased to 9.98% while return on equity (ROE) stood at 1.06%. Pre-tax profit margin rose to 7.72% as at third quarter 2016 from 3.11% a year ago.

HOLD RECOMMENDATION

Total Plc’s management succeeded in curtailing its expenses in spite of growing prices and high cost of finance. Hence, considerably improving profitability which otherwise