Total Reports Better-than-Expected Results; Sales Plummet 28%

TOT  French energy major Total, SA (NYSE: TOT – $40.79) said its adjusted net profit narrowed in the fourth quarter after it booked fewer investment write-downs than a year earlier. Excluding one-time charges such  as oil-price effects on inventories and other items, Total reported an adjusted net income of $2.08 billion in the quarter, 26% below fourth quarter 2014 and equal to $0.88 per share. Revenue fell to $37.75 billion in the period, from $52.51 billion in the same period a year earlier. Analysts expected a quarterly adjusted net profit of $0.70 per share and sales of $35 billion. Downstream refining and marketing businesses and other segments helped results despite oil prices falling sharply in 2015 with Brent decreasing by around 50%. The disappointing comparable results, however, was one of the better performances among the major international integrated energy companies. Discipline on spending was reinforced in 2015. The company’s cost reduction program allowed Total to save $1.5 billion, exceeding its original objective of $1.2 billion. Organic capital expenditures totaled $23 billion, a decrease of close to 15% compared to 2014. Upstream production increased by a record 9.4%, driven by the startup of nine projects and Refining & Chemicals was able to fully benefit from good margins thanks to the high availability of its installations. The Marketing & Services segment grew strongly, with retail networks growing by 6% and lubricants growing by 3%. The company also said it will maintain its $0.66 per share dividend, yielding 6.6%, at current levels.

These good-quality ADRs, hovering around a 52-week low, are a strong choice for income plus recovery potential to late-decade. The dividend appears safe, given the company’s excellent finances. However, growth in the payout may well continue to be slower than usual until oil prices perk up, while the euro’s weakness has hurt the translation into U.S. dollars. Meantime, Total stands to be a major beneficiary of what is likely to be a gradual recovery in oil prices and can continue to be held in income accounts for now.

TOT

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