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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
Name and Index Numbers
NAME OF STUDENT INDEX NUMBER

EMMANUEL GODSON AKWOVIAH PG1009517

JOHN AKROFI BAAKO PG1014017

AGNES AVEGAH PG1013717

CYNTHIA LARIBA ZOTBAH PG1027417

NAOMI ADZI PG1008617


WORK OUTLINE

 1. Brief outline of Total petroleum Ghana limited

 2. Classification and calculation of ratios

 3. Analysis and interpretation of ratios

 4. Conclusion
1. 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.
Classification and calculation of ratios

Table 1 Profitability
Profitability Formula 2016 2015 %Chang
e
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 %Chang
e
Current ratio Current assets/ Current liabilities 0.77 0.89 (0.12)
Quick ratio Current Assets-inventory/Current liabilities 0.56 0.59 (0.03)
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
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.
Table 4
Gearing Formula 2016 2015
Debt/Equity Debt/Equity*100 2.757409 4.90031
Debt/Equity + Debt Debt/Equity + Debt*100 2.6834162 4.671397
Interest Cover PBIT/ Interest 4.9949449 6.725954
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 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.