Totalenergies Marketing Nigeria Plc expects that its final quarter operations in 2023 will deliver a disappointing drop in profit from N3.6 billion in the same period in the preceding year to N1.6 billion, according to the company’s earnings forecast for the final quarter.
That will top up the energy company’s third-quarter profit of N10.8 billion to N12.4 billion at full year – marking a drop for the second year from closing profits of about N16 billion in 2022 and roughly N17 billion in 2021.
The upside forces seen in the company’s second quarter faded in the third and the final quarter is expected to be strewn with operating difficulties on both sides of declining earnings and rising costs – which will thin down profit in the quarter.
The company’s forecast final quarter sales revenue of N138.8 billion indicates a drop of 4.5 percent from sales delivery of over N145 billion in the same quarter in 2022.
A drop in input cost is also expected but the increase in gross profit for the quarter isn’t going to be sufficient to absorb cost increases.
The biggest pressures are expected to come from operating costs. A major increase in administrative expenses is expected in the final quarter, big enough to consume more than all the increase in gross profit.
Also, selling and distribution costs are expected to jump close to three times to slash operating profit in the final quarter.
Pressure is also expected to mount from finance costs in the final quarter spurred by the company’s borrowings that had multiplied three times to N146 billion at the end of the third quarter.
The expected profit drop in the final quarter will reflect the adverse cost and income pattern that cut after-tax profit by close to one-half in the third quarter. The company’s profit fell from almost N4 billion in the same quarter in 2022 to N2 billion in the third quarter of 2023.
While the company’s management has kept input costs under control, administrative and selling/distribution expenses could not be tamed and a foreign exchange loss in the quarter added to the operating pressure.
An outstanding growth of almost 42 percent in gross profit or an increase of over N6 billion to N21 billion for the third quarter was more than consumed by a much stronger growth in operating cost, including a foreign exchange loss of N4.8 billion, leading to a drop of 37 percent in operating profit to N4.5 billion for the quarter.
A major increase of 68.8 percent in finance expenses to N2.4 billion for the third quarter tilted the cost-income balance further, slashing pre-tax profit by 48 percent to slightly over N3 billion.
The company’s unaudited financial report for the third quarter ended September 2023 shows a good effort on the part of management to keep input costs from encroaching on sales but the resulting improvement in gross profit was eaten up by rising operating expenses.
Sales revenue for the nine months of trading went up by 25 percent year-on-year to N422.6 billion and the cost of sales grew by the same margin to N366.5 billion over the same period.
This is one step forward for the company in slowing down the cost of sales from a 33.7 percent rise at half a year and from growing ahead of sales. This has strengthened gross profit from a 17.6 percent increase at half year to a 25.7 percent advance to over N56 billion at the end of the third quarter.
The increase in gross profit amounted to N11.5 billion, which was consumed by a net foreign exchange loss of over N6 billion and an increase of N5.5 billion in administrative costs to N29 billion.
With an increase of 30 percent in selling and distribution expenses to almost N4 billion, operating profit went down from N20.7 billion to less than N20 billion over the review period, reversing from an increase of 14.2 percent at the half year.
The challenge of the rapidly rising cost of finance remains with an increase of 68.6 percent to N5.6 billion at the end of September 2023 With slower growth in finance income at 58.3 percent to N2.3 billion, net finance costs grew by 76 percent to N3.3 billion at the end of the third quarter.
The increase in net finance expenses added to the pressure of declining operating profit and lowered pre-tax profit from N18.8 billion in the same period in 2022 to N16.2 billion at the end of the third quarter.
The company closed the third quarter with a bottom line of N10.8 billion, down from N12.5 billion in the same period in the prior financial year. Profit margin is further down at 2.6 percent at the end of the third quarter from 3.2 percent at half year and 3.7 percent in the same period in 2022.
The company closed the third quarter operations with earnings per share of N31.87, down from N36.83 in the same period in 2022.
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