Total oil group reports record French profits

February 13, 2009
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, PARIS, Feb 13 – Energy giant Total, France\’s biggest firm, announced the highest annual net profit in French corporate history, sounding a rare positive note in a week of grim financial news.

In 2008 the firm 13.9 billion euros (18.0 billion dollars) thanks to record oil prices in the first half of the year, which generated big enough revenues to overshadow a post credit crunch collapse in demand.

Business leaders hailed the result, but markets remained unimpressed and environmental and anti-poverty campaigners urged France to impose a windfall tax to help the state cushion consumers from the effects of the downturn.

Profits began to fall in the fourth quarter of 2008 as the credit crunch hit demand and send crude prices tumbling.

"Unprecedented volatility marked the 2008 market environment," said Total chief executive Christophe de Margerie, noting that oil had peaked at about 150 dollars a barrel last year before plunging to as low as 35 dollars.

On average Brent crude traded in London at 97 dollars per barrel over the year, but at only 55 dollars in the last three months of 2008.

"It\’s wonderful good news, and we need good news," declared Laurence Parisot, head of the French employers\’ association MEDEF, in a radio interview. "It\’s excellent news to see our businesses earning money."

By contrast, the consumer groups Consumers, Accommodation and Standard of Living (CLCV) and UFC-Que Choisir demanded a windfall tax.

"Pump prices are coming down too slowly and never by as much as the oil price drops," alleged CLCV, while UFC said a tax would pay for measures to boost the spending power of the poorest households.

Meanwhile, environmental campaigners said the huge profits of the oil firm should be used to fund research into cleaner energy technologies.

"We have had very good results," admitted De Margerie. "But I fear unfortunately that it may be some time before we see them again."

Total\’s fourth-quarter net profit, adjusted to exclude inventory changes and other one-time items, dropped to 2.87 billion euros from 3.11 billion euros in the same period a year earlier.

And taking into account that some of Total\’s more inaccessible fields will be unprofitable at low oil prices, changes in inventory valuations meant the group slipped to a net loss in the fourth quarter.

Thus, according to the annual statement, the group slumped to a net loss without adjustments of 794 million euros for this latter period having made a net profit of 3.6 billion euros last year.

Fourth-quarter sales fell by 10 percent to 38.71 billion euros from 43.19 billion euros as the world\’s largest economies fell into recession and demand for fuel and oil derivatives plummeted.

Volatile exchange rates also complicated the picture for a firm that sells crude in dollars but files results in euros.

The dollar fell by seven percent against the euro over the year, despite surging back 14 percent in the fourth quarter.

Total is preparing for the future by investing in increased capacity in new fields, especially in Africa.

Shares in Total have declined by around 17 percent over the past six months, as the price of oil has fallen and sentiment has turned on the stock market due to the financial crisis.

Its shares fell 0.8 percent on Wednesday and opened on Thursday down another 0.71 percent at 39.80 euros.

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