Conoil Plc Q2/H1 Result: Sharp Earnings Decline Highlights Margin Pressures Amid Revenue Contraction

Bearish due to significant earnings deterioration

Conoil Plc’s financial performance for H1 2025 reflects serious profitability pressures, marked by an 89% drop in profit after tax, declining revenues, and sharply rising finance costs. While the balance sheet has held steady, operating inefficiencies and rising debt servicing costs have materially eroded shareholder value.

With no dividend declared and EPS dropping by nearly 90%, investors are currently facing significant downside risk. Unless the company executes a major turnaround in H2 2025 or oil marketing margins improve substantially, Conoil appears unattractive in the short-to-medium term.

📊 H1 2025 Financial Summary

Metric H1 2025 (₦B) H1 2024 (₦B) YoY Change

Revenue 143.65 180.57 ▼ 20.4%

Cost of Sales 132.28 163.05 ▼ 18.9%

Gross Profit 11.36 17.53 ▼ 35.2%

Distribution Expenses 2.24 1.88 ▲ 19.1%

Administrative Expenses 3.21 3.20 ≈ flat Finance Costs 4.76 2.22 ▲ 114.4%

Profit Before Tax 1.15 10.22 ▼ 88.8%

Profit After Tax 0.90 8.02 ▼ 88.8%

EPS (Kobo) 130 1,156 ▼ 88.8%

Total Assets 117.56 114.95 ▲ 2.3%

Shareholders’ Funds 40.39 41.17 ▼ 1.9% Retained Earnings 36.20 36.97 ▼ 2.1%

Key Weaknesses and Risks

1. Plunging Profitability

The company’s 89% decline in net profit and 88.8% drop in EPS represent severe earnings erosion. If this trend continues into Q3/Q4, it could result in the worst annual performance in over 5 years.

2. Rising Cost of Debt

Finance costs more than doubled YoY (+114%) to ₦4.76bn, likely due to higher interest rates or increased debt. This has become a major drain on the company’s bottom line, reducing room for reinvestment or dividend payouts.

3. Falling Revenues

Revenue dropped 20.4%, outpacing the decline in cost of sales — suggesting volume shrinkage or pricing weakness in the petroleum market. Gross margin compression has worsened profitability.

4. No Dividend Declared

Conoil’s decision to withhold dividends during a weak earnings period signals tight cash flows or caution, which may negatively affect investor sentiment.

🟡 Neutral/Positive Observations

• Stable Asset Base: Total assets grew modestly to ₦117.56bn, and current assets (₦111.7bn) are healthy — suggesting some liquidity strength.
• Receivables Dominant: Trade and other receivables (₦89bn) make up nearly 80% of current assets — a risk factor if collection delays continue.
• Minor Decline in Equity: Shareholders’ funds dropped only slightly (▼1.9%), which means the balance sheet hasn’t been heavily impaired yet.

📌 Conclusion & Recommendation

Conoil Plc is facing a clear earnings crisis — revenue decline, higher distribution costs, and a sharp rise in finance costs have combined to slash net income by nearly 90%. Although its asset base and liquidity remain steady, the company's core operating model is under strain, and without a catalyst to reverse this trend, further downside is likely.