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FINANCIAL REPORT AND ANALYSIS ON TOTAL PETROLEUM GHANA

LIMITED COVERING 2015 AND 2016

CONTENT PAGE REFERENCE


Name and Index Numbers 2

Brief outline of Total petroleum Ghana limited 3


And Industry Analysis

Classification and calculation of ratios with 4- 7


Interpretation

Conclusion 7

Appendix 8-11

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Name of Student Index Number
Emmanuel Godson Akwoviah PG1009517
John Akrofi Baako PG1014017
Philip Berko PG 1063317

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Brief outline of Total petroleum Ghana limited
Total Petroleum Ghana Limited is part of the global Total group, which is the
fourth largest International Oil and Gas Company in the world with presence in
over 130 countries.
Total’s operation in Ghana started in the 1960’s under the name Total Oil Products.
Since then Total has undergone various transformations, taking over British
Petroleum (BP), then Elf Oil and TotalfinaElf following a global merger of Total and
Elf and finally resulting in the incorporation of Total Petroleum Ghana Limited
when Total Outre-Mer acquired Mobile in Ghana.
This progression, coupled with great respect for quality, standards, achievements
and safety has propelled the Company to the forefront of the Industry.
Total is one of the leaders in the Oil and Gas industry and it has a strong brand
image in the Ghanaian market. The Company is well represented in all the ten
regions of the country with strategic locations in major cities and towns.

Industry Analysis
Lubricants are highly used in various commercial and industrial sectors, owing to
their aforementioned functions and advantages. The lubricants market is also
segmented by end-user industry, into power generation, automotive & other
transportation, heavy equipment, food & beverage, metallurgy & metalworking,
chemical manufacturing, and others (packaging, oil & gas (Drilling Fluids).
Automotive and other transportation dominated the market in 2017. Food &
Beverage was the smallest end-user industry for the global lubricants market with
a share of 3.77% in 2017. Total Petroleum Ghana hopes to increase its marketing
share which is currently below 14 percent of the market.

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Classification and calculation of ratios with Interpretation
Table 1 Profitability
Profitability Formula 2016 2015 %Change
ROCE PBIT/ Capital Employed
41.15 48.03 (7.15)
Gross Profit Margin Gross profit/revenue
9.72 8.81 0.91
Operating profit Operating Profit/Revenue
margin 3.94 3.88 0.06
Asset Turnover Revenue/Total Asset
3.31 4.13 (0.82)

The return on capital employed of Total Petroleum Ghana limited was 41.15% in
2016, representing a reduction of from 2015 figure of 48.03%.
This was because of a reduction in profit before interest and tax of and an increase
in capital employed. The reduction in profit before interest and tax was mainly due
to a reduction in sales revenue due to the challenging economic environment
experienced by the company in 2016, which led to lower sales volumes, higher
fixed operating and depreciation of the cedi.
In 2016, there has been an increase in Gross profit and Operating profit margins
from 8.81% to 9.72% and 3.88% to 3.94% respectively even though the sales
revenue decrease by GHS 134,502.
This is mainly because of efficient and effective management of cost of sales and
operating cost.
The asset turnover (a measure of assets utilization) has fallen from 4.13 in 2015 to
3.31 in 2016 this partly and relatively responsible for the deterioration in
performance.

Table 2 Liquidity Ratio


Liquidity Formula 2016 2015 %Change
Current ratio Current assets/ Current liabilities 0.77 0.89 (0.12)
Quick ratio Current Assets-inventory/Current 0.56 0.59 (0.03)
liabilities

The current ratio decreased from 0.89 times in 2015 to 0.77 times in 2016. This
means that the company’s current assets could not settle their liabilities within

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period under review. Generally a low current ration could suggest problems with
inventory management, ineffective standard for collecting receivables.
A liquid asset is one that trades in an active market and hence can be quickly
converted to cash at the going market price, and a firm’s “liquidity ratios” deal with
this question: Will the firm be able to pay off its debts as they come due over the
next year or so?
Current assets normally include cash, marketable securities, accounts receivable,
and inventories. Current liabilities consist of accounts payable, short-term notes
payable, current maturities of long-term debt, accrued taxes, and other accrued
expenses (principally wages).
This is because the company’s liabilities increased.

Table 3 Activity Ratio


Efficacy Formula 2016 2015 Change in
Days
Receivable Collection Trade receivables / Revenue*365 33 29 4
Period days
Creditors Payment trade payable / cost of sales*365 44 32 12
Period days
Inventory Turnover Cost of sales/Average Inventory 17 19 (2)
Ratio
A fall in inventory from 19 times in 2015 to 17 times in 2016 representing a negative
two (2) change. A low inventory turnover may reflect dull business, over investing
in inventory, accumulation of inventory and excessive quantities of inventory
relation to immediate requirements. An increase in creditor payment period from
32 days in 2015 to 44 days in 2016 indicates the average time it takes Total
Petroleum Ghana Limited to settle its debts with trade suppliers which has
increased by twelve (12) days. In addition receivable collection period measures
the cash flow, a shorter collection period is preferred. Comparatively it takes cash
flow is better in 2015 with 29 days than in 2016 with 33days.
The inventory turnover measures how efficient the company turns its inventory to
cash indicates operational and marketing efficiency. Helping in evaluating
inventory policy to avoid over stocking.

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Table 4 Gearing Ratios

Gearing Formula 2016 2015 Change


Debt Equity Ratio Debt/Equity*100 3 5 (2)
Debt/Equity + Debt Debt/Equity + Debt*100 2.6 4.6 (2)
Interest Cover PBIT/ Interest 4.9 6.7 (1.8)

The debt equity ratio in 2015 is five (5) and in 2016 three (3) representing a negative
change of two (2). For every share there is a debt which has reduced from 2015 to
2016 a reduction by two (2) meaning a sign that the company is over-relying on
equity to finance your business, which can be costly and inefficient. The interest
cover in 2015 which is 6.7 times is better than in 2016 which is 4.9 meaning Total
Petroleum Ghana limited makes 6.7 more earning than interest payment in 2015
and 4.6 times more earnings than interest payment in 2016. The interest coverage
ratio is a measure of the number of times a company could make the interest
payments on its debt with its EBIT.
The debt –to-equity ratio is a measure of Total Petroleum Ghana Limited financial
leverage that relates the amount of the company’s debt financing to the amount
of equity financing.
Table 5 Market Position and Investment
Investment Ratios 2016 2015 Change
Net profit after preference shares/ No.
Earnings per share of equity shares qualified for dividend 0.34 0.4 (0.06)
Dividend per share Dividend paid / No. ordinary shares 0.0002 0.00018 0.00002
Dividend payout Dividend per share/Earnings per
ratio share*100 0.06 0.05 (0.01)

The fall in earning per share from 0.4 in 2015 to 0.34 in 2016 has reduce shareholder
earning because of low turnover ratios and the profit margins as a result Total
petroleum Ghana Ltd. is not getting as high a return on its assets. The fall in asset
turn over translate in the fall in the dividend per share, earning per share and the
dividend payout ratio.
The market value ratios, relates the company’s stock price to its earnings, cash
flow, and book value per share. These ratios give management an indication of

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what investors think of the company’s past performance and future prospects. If
the liquidity, asset management, debt management, and profitability ratios all
look good, then the market value ratios will be high, and the stock price will
probably be as high as can be expected.

Conclusion
The company will continue its investment program, which is a strategy directed at
upgrading existing filling and service stations and opening new stations. This plan
will be carried out through the implementation of dynamic business diversification
concepts in the company’s existing boutiques and restaurants to enhance the
accessibility of the products and services that are available to customers
nationwide. New sales promotions will be introduced to boost lubricant sales and
to maintain the company as the market leader in Ghana. The company should
continue its strategy of expansion. The company should engage in the production
and distribution of solar energy technology and also invest in other forms of
renewable energy.

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Appendix 1
Statement of Profit or Loss & Other Comprehensive Income, Cash flow Statement,
Statement of Financial Position
Statement of Profit or Loss & Other Comprehensive Income
2016 2015
GH¢ '000 GH¢ '000
Revenue 315,409
386,402
Cost of Sales (156,345)
(189,345)
Gross Profit 159,064
197,057
Distribution Costs (73,555)
(85,371)
Administrative Expenses (29,530)
(32,162)
Other income 3,800
2,731
Operating Profit 59,779
82,255
Finance Income 7,648
6,793
Finance Cost (1,059)
(1,491)
Profit Before Income Tax 66,368
87,557
Income Tax (16,652)
(21,429)
Profit for the year 49,716
66,128

Total Comprehensive Income

Number of ordinary shares outstanding 116,207,288


116,207,288
earnings per share 0.43
0.57

STATEMENT OF FINANCIAL POSITION

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2016 2015
ASSETS
Non-Current Assets
Property, Plant & Equipment 61,865
155,389
Intangible Assets 120
580
61,985
155,969
Current Assets
Inventories 47,383
51,769
Trade &Other Receivables 7,175
11,064
Cash& Cash Equivalents 97,671
26,262
152,229
89,095
TOTAL ASSETS 214,214
245,064

EQUITY & LIABILITY


Stated Capital 10,000
10,000
Income Surplus Account 110,278
164,379
120,278
174,379
LIABILITIES
Non-Current Liabilities
Defferd Income Tax 6,907
7,649

Current Liabilities
Trade & Other payables 84,097
59,168
Current Income Tax 207
614
Dividend payable 2,725
3,254
87,029
63,036

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TOTAL LIABILITIES 93,936
70,685
TOTAL EQUITIY & LIABILITIES 214,214
245,064

STATEMENT OF CASH FLOWS


Cash Flows From Operating Activities
Cash generated from operations 92,995
62,803
Interest paid (1,040)
(1,491)
Interest Received 7,610
6,793
Tax paid (15,588)
(20,280)
Net cash generated from operating activities 83,977
47,825

Cash Flows From Investing Activities


Purchase of Property, Plant & Equipment (13,613)
(107,815)
Purchase of intangible assets (93)
(601)
Proceeds from sale of Property, Plant & 356
Equipment 680
Net cash used in investing activities (13,350)
(107,736)

Cash Flows from Financing Activities


Dividend paid (10,186)
(11,498)
Net cash used in financing activities (10,186)
(11,498)

(Decrease)/Increase in cash and cash 60,441


equivalents (71,409)

Cash and cash equivalents at the beginning of the 37,230


year 97,671

Cash and cash equivalents at the end of the year 26,262 97,671

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Appendix 2
Ratio Analysis
RATIOS FOMULAR OUTCOME OUTCOME

PROFITABILITY Formula 2016 2015


ROCE PBIT/ Capital Employed 41.15 48.03
65,214.00 158,492.00 69,997.00 145,738.00
GROSS PROFIT Gross profit/revenue 9.72 8.81
MARGIN 160,533.00 1,652,250.00 158,021.00 1,793,752.00
Operating profit Operating 3.94 3.88
margin Profit/Revenue 65,100.00 1,652,250.00 69,611.00 1,793,752.00
ASSET REVENUE/TOTAL 3.31 4.13
TURNOVER ASSET 1,652,250.00 499,532.00 1,793,752.00 434,654.00

LIQUIDITY
current ratio current assets/ current 0.77 0.89
liabilities 261,158.00 341,040.00 256,265.00 288,916.00
quick ratio Current Assets- 0.56 0.59
inventory/Current 191,922.00 341,040.00 171,582.00 288,916.00
liabilities

EFFICIENCY
receivable trade receivables / 33.36 28.80
collection days revenue*365 days 151,013.00 1,652,250.00 141,526.00 1,793,752.00
Creditors trade payable / cost of 44.18 31.66
payment days sales*365 days 180,569.00 1,491,717.00 141,892.00 1,635,731.00
Inventory Average inventory/ cost 16.94 18.90
turnover days of sales 69,236.00 1,491,717.00 84,683.00 1,635,731.00

GEARING
Debt/Equilty Debt/Equilty*100 2.76 4.90
4,253.00 154,239.00 6,808.00 138,930.00
Debt/Equilty + Debt/Equilty + Debt*100 2.68 4.67
Debt 4,253.00 158,492.00 6,808.00 145,738.00
Interest Cover PBIT/ Interest 4.99 6.73
65,214.00 13,056.00 69,997.00 10,407.00

INVESTMENT
RATIOS
Earnings per net profit after 0.34 0.4
share preference shares/ No.
of equity shares qualified
for dividend
Dividend per Dividend paid / no. 0.0002053 21099 111874072 0.000189
share ordinary shares 22,968.00 111,874,072.00
Dividend payout dividend per 0.000205302 0.3421 0.060012354 0.000188596 0.4041 0.046671
ratio share/earnings per
share*100

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