TotalEnergies Marketing Nigeria Plc expects its third-quarter profit to slump by more than 60 percent compared to the prior quarter, as higher financing costs and weaker top-line performance erode earnings.
Profit for the three months ending September 2025 is projected at N543 million, down from N1.41 billion in the second quarter, according to the company’s forecast filings on the NGX.
The decline comes despite a modest rise in gross profit, highlighting mounting pressure from administrative and interest expenses that are tightening margins.
The local downstream unit of the French energy giant is forecasting a 7.6 percent drop in revenue to N177.1 billion in Q3, compared to N191.6 billion in Q2. While cost of sales dropped proportionately, rising operational overhead and a spike in finance charges weighed heavily on the bottom line.
“The company is navigating a challenging macro environment characterised by FX volatility, tight liquidity, and rising borrowing costs,” said Shola Ajayi, a Lagos-based energy analyst. “This is reflected in its deteriorating finance position and shrinking cash reserves.”
Mounting interest costs
Finance costs surged to N7.24 billion in Q3 from N6.48 billion in Q2, representing a 12 percent increase, even as the company continued to pay down debt. Borrowings repaid during the quarter stood at N17.27 billion. Still, TotalEnergies’ reliance on expensive short-term funding instruments such as overdrafts contributed to the spike in interest expense.
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The rise in finance costs effectively wiped out gains from higher other income and gross profit. Net finance cost ballooned to N6.31 billion in Q3, up from N5.62 billion in Q2, dragging profit before tax down to N1.43 billion, a 33 percent quarter-on-quarter drop.
The pain was further compounded by a 9 percent increase in administrative expenses, which rose from N15.62 billion in Q2 to N17.08 billion in Q3. Selling and distribution costs moderated slightly from N4.36 billion to N3.62 billion.
Despite generating slightly higher operating profit of N7.74 billion in Q3 versus N7.76 billion in Q2, the company was unable to shield itself from the pressure further down the income statement.
Liquidity tightens
Cash flow data paints an equally cautious picture. Net cash generated from operating activities improved slightly in Q3 to N19.06 billion, up from N18.29 billion in Q2. But this was more than offset by a net outflow of N27.13 billion from financing activities, primarily interest payments and debt servicing.
As a result, the company’s cash and cash equivalents deteriorated further to a negative N155.5 billion by the end of September, from N145.8 billion at the end of June. The worsening liquidity position could limit flexibility in capital deployment, investment, or dividend payouts if not reversed.
“Sustained negative cash positions raise red flags, especially in a rising interest rate environment where rollover costs are high,” said Chuka Umeh, an energy research analyst based in Lagos. “It puts pressure on working capital and could affect future profitability.”
Sector headwinds
Nigeria’s downstream oil sector has faced margin compression amid subsidy reforms, exchange rate fluctuations, and logistical inefficiencies. While deregulation was expected to improve competitiveness, operators like TotalEnergies continue to face pricing uncertainty and sluggish consumer demand.
The macro backdrop remains volatile. The Central Bank of Nigeria’s tight monetary stance has pushed interest rates to a record high, while inflation continues to hover above 20 percent based on the new methodology. For import-dependent companies, this spells trouble, especially those carrying significant naira-denominated debt to fund working capital.
The company’s ability to maintain a modest operating profit despite cost pressures signals underlying resilience, but without a rebound in revenue or reduction in finance expenses, earnings growth could remain constrained through year-end.
Investors will be watching how management responds whether through asset sales, refinancing at better terms, or operational cost-cutting.
“There’s a strong brand and distribution network here, but the balance sheet stress is something to watch closely,” Ajayi added.
TotalEnergies Nigeria shares were unchanged at N705 at the last close. And the 1-year return of the company stood at 91.6 percent.
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