Total Nigeria forced its way through a major drop in sales to register a turnaround from a half-year loss of N537 million to a profit of N2.2 billion at the end of the 2020 financial year. The company’s management report for the year shows that the final quarter accounted for N1.7 billion or 78 percent of the full-year profit figure. The petroleum products marketing company faced the challenge of major loss of sales revenue in the year, closing the year’s operations with the lowest turnover figure in nine years. Its sales revenue plunged by 30 percent to N204 billion — the lowest revenue figure for the company any time since 2012.
This amounts to a loss of about N85 billion in sales revenue in the year. The downward trend in sales was sustained across the four quarters of the financial year with petroleum products, the main revenue line of the company, leading the drop.
Against the huge revenue loss in the year, the company’s management was able to defend profit. Its full-year profit is a slight decline from the closing profit figure of N2.3 billion in the preceding year. The ability to defend profit from the worst revenue performance in nearly a decade is the highpoint of the company’s operations in 2020.
Cost cutting was the management’s profit defensive strategy to compensate for lost sales revenue in the year. Except administrative expenses that failed to drop, cost cutting was applied all the way from cost of sales to finance expenses. The result is a big improvement in the ability to convert revenue into profit.
Net profit margin rose from 7.8 percent in 2019 to 11 percent for Total Nigeria in 2020. This is the highest net profit margin for the oil company in many years.
Big cost savings in the year came from a drop of 32 percent in input cost to N174 billion. This represents a reduction of N83 billion in cost of sales. Input cost claimed a reduced share of sales revenue at 85 percent compared to 88 percent in the prior financial year.
With the cost saving here, gross profit went down at a much reduced margin of 14 percent to close at over N30 billion against the 30 percent drop in sales.
There was a massive cut down in selling and distribution expenses in the final quarter, which helped to achieve a full year drop of 23 percent to less than N3 […]
