Total Energies Marketing Nigeria Plc has exceeded expectations by reporting a pre-tax profit of N13.730 billion for Q2 2024. This reflects a 95% year-over-year increase, far surpassing its forecast of N6.419 billion. This brings the H1 2024 pre-tax profit to N30.571 billion, nearly double the total pre-tax profit for 2023. The company’s Q2 2024 financial statements show an 87% year-over-year revenue growth to N260.105 billion, driven by petroleum product sales.
Key highlights (Q2 2024 vs Q2 2023):
- Revenue: N260.105 billion +86.69% YoY
- Cost of sales: N230.805 billion +93.46% YoY
- Gross profit: N29.300 billion +46.32% YoY
- Selling & Distribution Expenses: N3.807 billion +198.85% YoY
- Administrative Expenses: N14.507 billion +43.28% YoY
- Operating profit: N16.318 billion +99.40% YoY
- Net finance cost: N2.588 billion +128.75% YoY
- Profit after tax: N9.069 billion +96.12% YoY
- Earnings per share: N26.71 +96.11% YoY
- Cash and Cash Equivalents: N101.790 billion +15.46%
- Total Assets: N505.044 billion +34.64%
- Total Equity: N68.158 billion +21.54%
COMPANY’S REVIEW
Overall, the company’s Q2 2024 performance was remarkable, surpassing forecasts in key metrics, including revenue, gross profit, operating profit, pre-tax profit, and post-tax profit. The company projects a pre-tax profit of N6.3 billion for Q3 2024. This consistent outperformance reflects strong operational efficiency and robust financial health, likely to lead to dividends and attractive returns for shareholders. Such performance is likely to boost investor confidence, potentially driving up the share price. Following its Q1 2024 results and Q3 2024 forecast, the share price surged to a 52-week high of N388.90.
However, rising costs of sales and overheads continue to narrow profit margins. The company operates on narrow margins, as reflected in its Q2 2024 gross profit margin of 11.26%, lower than the 14.37% recorded in Q2 2023. The pre-tax profit margin of 5.28% and net profit margin of 3.49% indicate that a smaller portion of revenue is retained as profit. The oil and gas sector generally operates on narrow margins. For instance, MRS Oil reported a lower pre-tax margin of 4.12% and a post-tax profit margin of 2.69% during the same period.
A low profit margin, especially when revenue is driven by a single income stream, poses inherent risks. It makes the company vulnerable to market fluctuations, such as changes in commodity prices or regulatory shifts, which could impact overall profitability, financial health, and return on equity. Total’s ability to manage its costs is crucial. The company has maintained a growth trajectory in profitability while consistently paying dividends. Over the past five years, Total has achieved a compound annual growth rate (CAGR) of 54% in earnings per share and 39% in dividends per share.
Last year, the company paid out a dividend per share of N25 or N8.488 billion from a net profit of N12.913 billion. With the net profit for H1 2024 already at N20.57 billion and retained earnings of N67.98 billion, the company will likely sustain its dividend payout for 2024. Currently, the stock offers a dividend yield of 6.49%, among the highest in the oil and gas sector, and has recorded a year-to-date share price gain of 1.01%. Given this strong dividend yield and positive performance thus far, investor confidence could be bolstered, potentially leading to a significant increase in the share price.
While achieving last year’s impressive year-to-date gain of 99.48% might be challenging, sustained positive performance and higher dividends could contribute to a notable rise in the stock price.
Source: Nairametrics
