Totalenergies Marketing Nigeria Plc is increasing sales while also losing money for the second consecutive fiscal year.
The company’s after-tax profit decreased by 4.6 percent to less than N4.2 billion in the first quarter (Q1) even as sales income increased by as high as N37.7 billion or 38.6 percent year over year to N135.3 billion.
The energy marketing company’s interim financial report for the three months ended March 2023 reveals that cost savings are now absent from the earnings story, just as they were the year before.
TheCable claims that the company’s cost structure has diminished the moderate behavior with which it multiplied after-tax earnings by more than eight times to N16.8 billion in 2021 for the second year in a row.
Almost the entire increase in sales income was devoured by rising cost of sales, which increased by N37.2 billion or 44.3 percent year-over-year to N120.3 billion in Q1.
The cost of sales increased faster than turnover last year, 47.5 percent vs 41.4 percent, to conclude at over N422 billion for the entire year. Margin pressure caused by this decreased the year-end profit to N16.4 billion.
However, the business had a solid start to the year with a profit increase of 47% to N4.3 billion in Q1.
Input costs accounted for 89 percent of sales revenue in Q1, up from 85 percent in the same quarter a year prior and even more from 87.5 percent at the end of the 2022 fiscal year.
At the end of March 2023, gross profit only increased 3.6 percent to N15 billion due to the incursion of cost of sales.
However, the company was able to reduce the impact of input costs and boost operational profit thanks to certain cost savings and gains in other income.
To N968.6 million, other income increased by 8.5 percent year over year, helped by cost savings from selling and distribution costs and administrative costs.
Selling and distribution costs decreased by 21.1 percent to less than N916 million, while administrative costs increased just 3 percent to N7.8 billion over the review period.
Due to the changes, operating profit for the first quarter increased by 9.8% to N7.3 billion. The increase in operating profit, however, was unable to trickle down to the bottom line due to the increased cost of financing.
After increasing by more than three times to finish at N5.5 billion in 2022, finance costs increased by 110.6 percent year over year to N1.6 billion in the first quarter.
With a net finance income of N746 million, net finance costs increased significantly from N77.6 million at the end of the first quarter to almost N858 million. Pre-tax profit fell from N6.6 billion to N6.4 billion throughout the course of the quarter as a result of the increase.
The amount borrowed by TotalEnergies increased slightly from its closing balance of N47.7 billion at the end of 2022 to N52.6 billion at the end of March 2023.
At the conclusion of the first quarter of 2023, the company’s profit margin had decreased from 4.5 percent during the same period in 2022 to 3.1 percent.
The crucial changes to keep an eye out for during the current fiscal year are whether the corporation would slow down rising input costs and stretch out profit margin in the upcoming interims.