Total Energies Plc saw its sales revenue drop in 2026 for the second year in a row, but smart cost-cutting measures helped the company rebound to profit after wrapping up 2025 with a significant loss.
The energy company bounced back from a loss of N120 million in the first quarter last year and a full-year loss of nearly N14 billion in 2025, posting an after-tax profit of N1.17 billion at the close of this year’s first-quarter operations.
The company’s interim financial report for the first quarter ending March 2026 reveals that declining sales revenue is a challenge. Revenue dropped from around N222 billion in the same quarter of 2025 to N197 billion at the close of first-quarter trading in 2026—a decrease of N25 billion over the period.
Total Energies’ 2025 operations had recorded a drop in turnover from N1.04 trillion in the previous year to less than N678 billion at full year – a loss of more than N274 billion in sales for the year.
The company’s management expects that loss of sales revenue would persist in the second quarter, but profit delivery would be sustained, even slightly improved.
Following management’s earnings forecast, sales revenue of roughly N170 billion is expected for the second quarter, a drop from the N202 billion turnover the company generated in the same quarter in 2025. It will also be a drop quarter-on-quarter from the first-quarter sales revenue of N197 billion.
Even with the expected revenue drop in the second quarter, profits are projected to surge over 11 times year-on-year, rising from around N116 million to N1.3 billion during the period.
The company’s boost in profits despite ongoing sales declines can be traced to shifts in cost and income trends from the previous year that took a different turn in the current financial year.
The biggest of the favourable changes so far is a minimum tax of N1.1 billion the company incurred in the first quarter of last year, which is completely out of the way this year.
The minimum tax, in addition to an income tax of N134 million for the first quarter of last year, consumed more than the pre-tax profit of N1.12 billion for the period, creating a loss of N120 million for the quarter.
This year, the complete absence of minimum tax provision permitted a good part of the company’s pre-tax profit of N1.9 billion to flow down into the bottom line to effect a turnaround.
Another favourable development enabling the return to profit is a limited drop in other income compared to the record of the previous financial year. Other income had fallen by 54 percent at the end of 2025, which reinforced the drop in sales revenue to create the big loss in the year.
While the drop in other income has continued in the current financial year, the speed of the decline has slowed down considerably. At slightly under N2 billion at the close of the first quarter, other income went down by 18 percent year-on-year.
The decline in other income reflects a sharp drop in net foreign exchange earnings as well as a drop in network income.
The third leg of the profit rebuilding tripod of the company is a drop in finance expenses, which has lowered the proportion of operating profit consumed by net finance cost.
Cost of finance went down from N6.8 billion in the same quarter in 2025 to below N4.8 billion at the end of March 2026. That lowered net finance cost from N5.8 billion to about N4.3 billion over the period and consequently the share of operating profit claimed by net finance expenses fell from 84 percent to 69 percent over the period.
The drop in finance expenses however appears unsustainable as interest bearing financial liabilities are on the rise. Bank borrowings have expanded from N84.7 billion at the end of last year to N100 billion at the end of the first quarter. Lease liabilities also have surged upward from about N698 million to the region of N2 billion over the same period.
More than these are concerns over the inability to arrest the sustaining loss of sales revenue. The cost saving and revenue issues that have enabled a turnaround for the current financial year offer no operational strengths in the face of falling sales revenue.
While gross profit improved by N2.44 billion year-on-year to about N27 billion at the end of the first quarter, administrative expenses rose by N2.75 billion to N20.5 billion, leading to a drop in operating profit from almost N7 billion to slightly over N6 billion.
While cost savings may suffice to sustain a rebound this year, the company’s earnings outlook beyond the current financial year is clouded by the inability to get sales revenue looking up once again.
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