Total Energies beats forecast, posts N11.279 billion pre-tax profit in Q3 2024

Total Energies Marketing Nigeria Plc has reported a pre-tax profit of N11.279 billion for Q3 ending September 30, 2024, reflecting a 258.62% year-over-year increase and surpassing its Q3 pre-tax forecast of N6.270 billion.

This brought the nine-month 2024 pre-tax profit to N41.850 billion, more than double the company’s total pre-tax profit for 2023.

Also, according to the company’s Q3 2024 financial statements, revenue grew by 78.39% year-over-year to N263.963 billion, driven by the revenue from petroleum products

Key highlights (Q3 2024 vs Q3 2023)  

• Revenue: N263.963 billion +78.39% YoY
• Cost of sales: N234.680 billion +84.95% YoY
• Gross profit: N29.283 billion +38.88% YoY
• Selling & Distribution Expenses: N4.063 billion +128.17% YoY
• Administrative Expenses: N16.383 billion +45.90% YoY
• Operating profit: N17.885 billion +297.74% YoY
• Net finance cost: N6.606 billion +388.78% YoY
• Profit after tax: N6.854 billion +237.07% YoY
• Earnings per share: N20.19 +237.06% YoY
• Cash and Cash Equivalents: N99.607 billion +12.99%
• Total Assets: N530.914 billion +41.53%
• Total Equity: N75.012 billion +33.76%

Commentary 

Total Energy’s performance in Q3 2024 was impressive, surpassing forecasts across key metrics, including revenue, gross profit, operating profit, pre-tax profit, and post-tax profit.

• The company has projected a pre-tax profit of N8.62 billion for Q4 2024. While this forecast appears ambitious given the pre-tax profits achieved in the first three quarters, Total’s consistent record of outperforming projections suggests it may exceed this target.
• This could lead to increased dividends and attractive returns for shareholders, likely enhancing investor confidence and sentiment and potentially driving up the share price.

• However, rising costs of sales and overheads continue to compress profit margins. In Q3 2024, the gross profit margin was 11.09%, down from 14.25% in Q3 2023.

• Additionally, the pre-tax profit margin of 4.27% and net profit margin of 2.60% are lower than in previous periods and may be considered generally low. This margin compression indicates that a smaller portion of revenue is retained as profit, potentially impacting Total’s profitability, financial health, and return on equity.

A lower profit margin, particularly when revenue is largely driven by a single income stream in the oil and gas sector, presents inherent risks.

This concentration can make Total vulnerable to market fluctuations, including changes in commodity prices and regulatory shifts, which directly impact profitability. Effective cost management will be crucial for Total’s continued success.

Despite cost pressures, Total has maintained a growth trajectory in profitability and consistently paid dividends, which investors value highly.

• 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. For the first nine months of 2024, earnings per share grew by 142.41% year-over-year to N98.37, more than doubling the full-year EPS of 2023.
• In 2023, the company paid a dividend of N25 per share, totaling N8.488 billion from a net profit of N12.913 billion. With EPS already at 112% of 2023 levels, it is highly likely that Total will sustain or increase its dividend payout in 2024.
• Currently, the stock offers a dividend yield of 3.71%, among the highest in the oil and gas sector, and has recorded a year-to-date share price gain of 75%, up significantly from a 1.01% increase in the first half of 2024.

This relatively strong dividend yield, coupled with strong financial performance, is likely to bolster investor confidence and may lead to further share price appreciation.