CONOIL PLC Q3 Result – Sharp Earnings Decline Amid Softer Volumes, Higher Finance Costs and Margin Compression

Executive Summary

Conoil Plc reported a challenging performance for the nine-month period ended September 30, 2025, reflecting significant earnings pressure driven by declining sales volumes, margin contraction, and elevated finance costs. Despite maintaining topline scale, heightened operating and funding costs materially weighed on profitability. Revenue declined 18% YoY to ₦203.8 billion, reflecting lower petroleum product sales. Gross profit dropped 35% YoY to ₦16.7 billion, underscoring pricing and cost pressures in the downstream marketing segment. Profit Before Tax fell sharply by 88% YoY to ₦1.88 billion, while Profit After Tax contracted by 88% YoY to ₦1.46 billion.

EPS dropped from ₦17.47 to ₦2.11, highlighting the steep decline in shareholder return. Rising finance costs (+178% YoY) and increased receivables suggest tightening liquidity and working capital stress. Despite earnings pressure, Conoil’s asset base strengthened, with total assets rising 10% YTD to ₦126.2 billion, supported by increased receivables and strategic investments in property, plant & equipment. However, borrowings increased by 38% YTD, signaling higher leverage to support operations.

Financial Highlights – Statement of Profit or Loss

₦’000

Q3 2025

Q3 2024

9M 2025

9M 2024

Revenue

60,179,847

68,557,244

203,827,031

249,130,924

Cost of Sales

(54,864,953)

(60,541,308)

(187,149,022)

(223,587,708)

Gross Profit

5,314,894

8,015,936

16,678,010

25,543,216

Distribution Expenses

(779,032)

(1,588,753)

(3,124,704)

(3,471,387)

Admin Expenses

(1,673,775)

(1,149,846)

(4,782,497)

(4,352,967)

Finance Cost

(2,133,815)

(253,386)

(6,895,506)

(2,476,094)

Profit Before Tax

728,273

5,023,951

1,875,302

15,242,767

Tax

(163,861)

(923,035)

(410,472)

(3,120,081)

Profit After Tax

564,412

4,100,916

1,464,830

12,122,686

EPS (₦)

₦0.81

₦5.91

₦2.11

₦17.47

Revenue Performance

• Revenue declined 18% YoY to ₦203.8bn, linked to:
  • Lower product lifting volumes
  • Supply disruptions and pricing pressures in downstream marketing
• Gross margin declined due to higher landing and operating costs

Market Interpretation: Downstream operators continue to face FX volatility, deregulated PMS dynamics, and intensified competitive pricing pressures, impacting retail and aviation fuel sales margins.

Profitability & Margins

• Gross Profit: ₦16.7bn (-35% YoY)
• Gross Margin: ~8.2% (vs ~10.3% YoY) – margin squeeze from rising costs
• Operating Expenses: flat YoY but elevated relative to reduced revenue base
• Finance Cost: ₦6.9bn (+178% YoY) – reflecting borrowings and increased rates
• PBT: ₦1.9bn (-88% YoY) – major profitability drop
• PAT: ₦1.5bn (-88% YoY) – weak bottom-line delivery

Commentary: Sharp finance cost surge indicates working capital financing strain, a major headwind under current deregulated downstream market dynamics.

Balance Sheet Overview

₦’000

Sept-2025

Dec-2024

% Δ

Total Assets

126,191,188

114,951,450

+10%

Total Equity

40,955,105

39,490,276

+4%

Borrowings

39,690,053

28,675,018

+38%

Cash & Bank

9,270,238

7,264,201

+28%

Retained Earnings

36,783,360

35,318,531

+4%

Interpretation

• Higher PPE points to continued network infrastructure and operational upgrade investments
• Inventories dropped significantly, offset by rising receivables — liquidity and collection cycle under pressure
• Borrowings climbed to fund working capital needs

Key Ratios & Indicators

Metric Trend

Revenue Growth (-18% YoY)

Gross Margin (8.2% vs 10.3%)

PBT Growth (-88% YoY)

PAT Growth (-88% YoY)

Asset Growth 10%

Borrowings 38%

Insight: Leverage increasing in a declining earnings environment — potential risk to cash flows and credit profile if not reversed.

Strategic Insights

• Nigeria’s deregulated petroleum market demands operational agility and cost management
• Working capital pressure requires efficiency and improved receivables cycle
• Asset expansion positions Conoil for volume rebound if macro and supply conditions improve

Strengths

• Strong brand presence in retail downstream fuel distribution
• Expanding asset base supports future sales growth
• Positive retained earnings and growing equity base

Weaknesses

• Weak earnings and compressed margins
• High borrowing costs and rising finance leverage
• Rising receivables may strain liquidity

Outlook

Conoil faces a transitional operating environment as downstream deregulation reshapes industry economics. Focus will likely remain on:

• Working capital tightening & cost efficiency
• Optimizing supply logistics & inventory management
• Strengthening margins via premium product mix (e.g., lubricants, aviation fuel)

Risks: FX volatility, supply chain constraints, rising interest rates, and aggressive pricing competition.

Analyst View

“Conoil's 9M 2025 results reflect significant pressure on core operations driven by falling revenue, margin erosion, and rising finance costs. While the balance sheet remains stable, working capital financing strain and lower profitability highlight the need for tighter cost discipline and enhanced receivable recovery efforts. Strategic investments may support medium-term performance as the market stabilizes.”

Conclusion

Conoil delivered a weak operating performance in 9M 2025, reflecting sector-wide challenges and company-specific financing pressures. While asset growth and liquidity coverage offer short-term resilience, profitability recovery will depend on improved cost control, working-capital discipline, and more favorable market conditions.