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Rising debt squeezes returns for BRVM-listed oil firms

Wednesday, 29 May 2024 14:12
Rising debt squeezes returns for BRVM-listed oil firms

(Ecofin Agency) - Three oil distribution companies listed on the Abidjan-based Regional Stock Exchange (BRVM) ended 2023 with high debt levels, putting pressure on investor returns. Vivo Energy saw the most significant rise in net debt.

By the end of 2023, this company’s net debt stood at 172% of its equity, up from 42% the previous year, marking its highest level since 2019, according to financial reports. TotalEnergies Senegal followed a similar trend with a net debt-to-equity ratio of 156.11%, up from 127.63% in 2022, also reaching a four-year high.

For TotalEnergies Côte d'Ivoire, the ratio was 29.47%. Although lower, this was still the highest since 2019. Alongside rising debt, financial returns (profits for shareholders) declined between 2019 and 2023. The financial return for the company dropped from 23.19% to 19.06%.

TotalEnergies Senegal saw its financial return fall from 31.5% in 2022 to 18.8% in 2023. Vivo Energy, although improving from a low of -25% in 2019, achieved a shareholder return of 15.9% by the end of 2023, which remains below the industry average.

Analysis of the three companies shows that operating margins and net profit shares from revenue also declined, while financial charges on their debts increased. Both TotalEnergies subsidiaries announced net dividends for 2023, averaging a 10% yield for both companies.

However, this yield is mainly due to the falling stock prices of the two companies. For instance, Vivo Energy did not distribute dividends for FY2023. The companies attribute their performance to various factors, but equity investors are looking for better returns on their investments.

It’s important to note that not all shareholders are affected equally. These companies are subsidiaries of major energy groups like TotalEnergies and the British Shell group, which are often their suppliers and thus enjoy consolidated revenues. Other shareholders, however, do not benefit from the same income opportunities.



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ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

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