Total Nigeria managed to overwrite a half year loss in the third quarter but the company is still headed for the worst performance in many years in the 2020 financial year — crashing sales revenue is the centre of its challenges.
The petroleum marketing company lost 37 percent of turnover quarter-on-quarter in the third quarter ended September 2020.
Loss of sales revenue is happening for the second straight year after a drop of 5 percent to N292 billion in 2019. The drop has accelerated to nearly 32 percent year-on-year at the end of the third quarter. Full year outlook indicates that sales revenue could descend to the region the company played as far back as 2015 when it closed at N208 billion.
Loss of sales is compounded by inability to keep key expenses down with sales revenue, which has crashed operating profit.
A drastic move by the company’s management to cut cost in the third quarter enabled it to overwrite a net loss of N537 million at the end of half year operations and returned a net profit of N500 million at the end of September.
Total Nigeria has lost profit every year since its peak profit record of N14.8 billion in 2016. Last year, it suffered a drop of 71 percent in after tax profit to N2.3 billion – the worst performance record for the company in at least a decade. Baring a final quarter windfall, another major profit drop looks quite likely for the petroleum company at the end of 2020.
The rebound in the third quarter helped the company to escape from losses built in the first two quarters of the year. This happened through cost saving from input cost and finance expenses with which the company built a profit of N1 billion in the third quarter.
Cost of sales was slashed by 42 percent quarter-on-quarter with which the company was able to raise gross profit from the large drop in turnover in the quarter. Also, finance expenses dropped by 72 percent over the same period to N611 million for the third quarter.
These two favourable developments provided the company the strength to return to profit in the third quarter despite the accelerating drop in turnover. An operating loss of N1.6 billion in the second quarter reversed to an operating profit of almost N2 billion for the third quarter.
The ability to stage the turnaround from a 37 percent drop in sales is the […]
