TOTAL’s Board of Directors, chaired by CEO Thierry Desmarest, met on September 1 to review the consolidated financial statements for the six months ended June 30, 1998.

Group sales for the 1998 first half amounted to 82.3 billion francs, a decline of 14 percent versus the same period last year (or an 8-percent decline excluding the merged TOPNA unit). Operating income from the business segments for the 1998 first half was 6,601⁽¹⁾ million francs, a 6-percent decrease versus the 1997 first half. Consolidated net income for the 1998 first half was 3,972 million francs, stable compared to the 1997 first half.

Earnings per share were 16.1 francs based on a fully-diluted weighted-average number of shares outstanding of 246.1 million shares in the 1998 first half.

Consolidated Accounts

⁽¹⁾ excluding charge for negative inventory effect : - 552 MF

⁽²⁾ excluding non-recurring items

⁽³⁾ using the average exchange rate for the period : 6.06 FF/$ in 1H98, 5.70 FF/$ in 1H97 and 5.84 FF/$ in 1997

Different trends for the business segments

The average Brent crude price fell by 30 percent to $13.65 in the 1998 first half versus $19.58 in the 1997 first half. The dollar rose by 6 percent to 6.06 francs versus 5.70 francs, and average refining margins in Europe increased by 6 percent to $17.1/ton as compared to $16.1/ton.

Taken together (the dollar exchange rate, crude prices and European refining margins) the environment had a negative impact of 1.7 billion francs on operating income. This impact was partially offset by 1 billion FF from growth and productivity gains in all of the Group’s segments and by other specific elements totaling 0.3 billion francs.

⁽⁴⁾ excluding charge for negative inventory effect : -552 MF

Upstream : Upstream production rose by 7 percent to 840 mboe/d (568 mb/d of liquids and 272 mboe/d of gas) in the 1998 first half versus 786 mboe/d in the 1997 first half. Production growth, productivity gains and an increase in the dollar exchange rate limited the decline in Upstream operating income to 32 percent as compared to the same period last year.

Downstream : operating income for the Downstream segment showed an increase of nearly 1 billion francs (+64 percent). The strong performance of the Downstream segment resulted notably from a decrease in the refining break-even point and from the improvement of marketing and trading operations in Europe and overseas.

Chemicals :operating income rose by 5 percent. The resins and adhesives sectors as well as Hutchinson performed well; however, the paints sector was faced with a less favorable operating environment.

Investments and cash flow

Cash flow rose to 9,625 million francs in the 1998 first half from 9,560 million francs in the 1997 first half. Gross investments in the 1998 first half rose by 19 percent to 10,879 million francs from 9,116 million francs in the 1997 first half, due to the many developments in the Upstream segment. Divestments, based on sales prices, in the 1998 first half were composed primarily of financial participations and amounted to 2,084 million francs versus 884 million francs in the 1997 first half.

Consolidated equity at June 30, 1998 was 67.5 billion francs, after the payment of the annual dividend on May 27, 1998. The net debt-to-equity ratio for the Group rose to 31.7 percent at June 30, 1998 from 26.8 percent at year-end 1997.

Outlook

TOTAL demonstrated its ability to resist falling crude prices in the first half of 1998. Despite the currently weak environment and an expectation of continued volatility, the Group is confident that the projects in hand will support its growth and profitability objectives. In the Upstream segment TOTAL will continue to invest only in projects with low break-even points. In the Downstream and Chemicals segments, TOTAL pursues growth within the framework of improved profitability.