Total Kenya’s Growth Positive besides a 16% Drop in Net Profit

Total Kenya Plc (NSE: TOTL) has posted a 16% decline in net profit for the year ended December 31, 2018, from KSh2.7 billion in 2017 to KSh2.3 billion attributed to the effect of volatile international prices of finished products.

Further, this affected its Earnings Per Share to Ksh 3.67. This decline in profitability was impacted by a 3.2% dip in gross sales, lower finance income (-25.3% y/y), other income (-12.7% y/y) and increased operating expenses (7.9% y/y).

However, Genghis Capital Analysts observed an “Improvement in the gross margin to 7.7% from 7.4% in FY17.”

This is attributable to lower participation in the low-margin Open Tender System (OTS) business and increased sales in the Retail and Consumer segments of the business.

Forex losses decreased to Ksh 1.3Mn from Ksh 77.4Mn in FY17 with the improvement attributed to stability of the Kenya Shilling against the USD in the year under review.

A full year dividend of KES 1.30 has been declared (dividend yield of 4.3%), payable to investors in the books on 26th June 2019.

We anticipate slightly stronger FY19 results on the back of continued employment of the firm’s high margin strategy away from OTS coupled with a stronger KES against the greenback and stable crude prices. Total’s high margin lubricants business is second highest in Kenya after Vivo Energy (39.8%) with a market share of 36.4% (3Q18 PIEA statistics) and we expect Total to gain from this competitive advantage over its local peers. Additionally, we believe Total’s expansion strategy (8 stations per year locally since 2016), as well as new stations in the region undertaken in 2018, will be profitable, adding to topline growth in 2019.

– Genghis Capital Total Kenya Plc (NSE: TOTL) FY18 Earnings Note