Total Nigeria Suffered 29% Revenues Drop Due to Lockdown
In the first half of 2020, Total Nigeria Plc earnings dropped off significantly due to outbreak of coronavirus which necessitated economic lockdown.
This resulted to a ₦537 million loss in the first half of financial year 2020 which analysts considered as disappointing coming from a profit position.
The outbreak of the virus reduced economic activities to barest minimum as government initiate total lockdown to curb the spread of the diseases.
Total Nigeria Plc unaudited statement shows that sales dropped by about 30%. This came on the back of lower demand for fuel and declined in global prices of oil.
Inactivity in the economy pull down demand for fuel significantly and Total Nigeria earnings took a dive.
In its recently released earnings for the first half, Total reported a 29% year on year decline in revenue to ₦106.7 billion.
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This under performed Vetiva analysts’ estimate of ₦112.8 billion.
Notably, sales of petroleum products dropped by 32% year on year to ₦83.7 billion, which was largely a reflection of declined sales volumes as well as lower fuel prices.
Additionally, analysts said the company’s lubricant business posted a 15% year on year drop in turnover to ₦23 billion in the same period.
This declined was also dragged by weaker sales volume in the period based on the underlie factor.
Amidst the decline in turnover and weaker operating efficiency, TOTAL recorded an after-tax loss of ₦537 million.
This was quite disappointing when compare to ₦130 million after tax profit declared in the comparable in 2019.
In its outlook, analysts at Vetiva stated that margin improvement, lower finance costs will support the company’s earnings in the second half of 2020.
In the second quarter (Q2’20), Total performance was largely dragged by the lockdown in Lagos and a few other states, coupled with the weaker operating efficiency witnessed during the quarter.
Vetiva stated that although the lockdown was lifted in May, analysts believe the company’s turnover will decline in subsequent quarters, as fuel demand is expected to drop amid social distancing restrictions.
Based on this, Vetiva explained that the firm has trimmed its forecast for fuel revenue to ₦180.9 billion in 2020 from ₦203.9 billion.
Due to weak macroeconomic condition and disappointing earnings released, Vetiva analysts downgraded estimate.
“We also lowered our projection for lubricant revenue to ₦46.0 billion from ₦52.4 billion, bringing our projection for total revenue to ₦227.0 billion from ₦256.3 billion”, Vetiva stated.
Similarly, the investment firm lowered projection for gross margin to 12% as against 14%, resulting in a gross profit of ₦31.8 billion from ₦35.1 billion in 2019.
Meanwhile, analysts forecast for operating expenses has been raised to ₦27.2 billion amidst higher inflationary pressures.
“We expect finance costs to come in lower at ₦3.6 billion as against ₦7.9 billion, driven by further deleveraging of the balance sheet”, Vetiva said.
All in, analysts said they expect earnings after tax to come in at ₦3.1 billion from ₦2.3 billion in 2019, translating to return on average earnings (ROAE) of 11% compare to 8% in 2019.
Total Nigeria Suffered 29% Revenues Drop Due to Lockdown
