Boston, MA 05/01/2014 (wallstreetpr) – Total SA (ADR) (NYSE:TOT) reported a tough Q1, but it had somewhere to blame for its 10 percent fall in earnings. The company said its performance in the quarter would have been better had it not been for the lower production levels and soft crude oil prices. However, the company said it does not expect the challenges to be permanent as Q2 is already showing positive signs.
Addressing the challenges in the latest quarter requires a range of actions, some of which may improve earnings in the next quarter and others able to improve earnings in the long-term.
As an immediate measure, Total SA (ADR) (NYSE:TOT) announced plans to undertake more austerity measures to protect the bottom line. According to CEO Christophe de Margerie, the central idea at Total is making the company more efficient now that the market conditions are challenging.
Total SA (ADR) (NYSE:TOT) said its production in Q1 did not hold up well as was expected and even lower crude oil prices contributed to poor margins. Moreover, the company suffered higher exploration costs that further dented the bottom-line.
As such, a decline in earnings was inevitable in the quarter, but the future can be salvaged, it said.
Q1 results in summary
Total SA (ADR) (NYSE:TOT) reported $3.3 billion in net profit. That was down from $3.7 billion in the same period a year ago. Net profit per share in the latest quarter was $1.46, down from $1.63 a year ago.
Projects yet to behave
Total SA (ADR) (NYSE:TOT) spent the past years making substantial investments that were intended to boost production so that the company could take advantage of the high energy demand in emerging markets especially in Asia. However, some of those projects have yet to show their benefit. As such, the company can be seen unloading nonstrategic assets. The company plans to sell its non-core assets worth up to $20 below by end of 2014. And so far, the company has unloaded assets worth $14 billion.
Oil reserve
As much as Total SA (ADR) (NYSE:TOT) believes that increased cost reduction will support bottom-line, the long-term solution to the profit problem lies in finding new oil reserves, and that is one area that the company is concerned.
