Total Nigeria’s Profit Falls 70% on High Financing Costs

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Goddy Egene

The reliance on bank borrowings to finance its operations continued to have a negative impact on the fortunes of Total Nigeria Plc as it has recorded a decline of 69 per cent in its bottom-line for the year ended December 31, 2019.

Financing costs jumped by 193 per cent from N2.86 billion in 2018 to N6.706 billion in 2019, thereby depressing profit after tax (PAT) to N2.422 billion, down from N7.969 billion in 2018.

An analysis of the results showed that Total Nigeria posted a revue of N290.883 billion in 2019, down marginally by 5.6 per cent from N307.987 billion in 2018. Gross profit stood at N33.827 billion, as against N34.785 billion in 2018.

Other income rose on the back of N2.763 billion realised from sale of property, plant and equipment to hit N4.597 billion in 2019 compared with N1.451 billion in 2018. The company ended with an operating profit of N10.358 billion, up from N9.812 billion in 2018.

However, net financing cost jumped from N2.286 billion to N6.706 billion in 2019. Consequently, profit before tax fell from N12.098 billion to N3.652 billion. A reduction of 70 per cent in taxation from N4.137 billion in 2018 to N1.231 billion in 2019, made PAT to print at N2.422 billion, down from N7.961 billion in 2018.

Some shareholders of Total Nigeria have been calling for equity injection into the firm so as to reduce its reliance on debt funding.

According to one of the shareholders, the chairman of Total Nigeria Plc had personally complained about the high cost of doing business due to heavy reliance on debt financing.

“The company can even capitalise some its reserves by issuing bonus shares to shareholders. Total Nigeria Plc has a share capital of N169 million but retained earnings of N30.561 billion. Why can’t they capitalise part of the retained earnings and give script issues to the shareholders instead of continually borrowing from the banks and pay heavily for that,” the shareholder said.