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Update shared on05 Aug 2025

WaneInvestmentHouse's Fair Value
₦34.69
9.5% overvalued intrinsic discount
05 Aug
₦38.00
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7D
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Eterna Plc: Sustains Profitability Amid Sector Headwinds, Driven by Strategic Agility

Eterna Plc has delivered a solid turnaround in H1 2025, reporting a ₦1.57 billion pre-tax profit compared to a ₦3.57 billion loss in H1 2024. Revenue grew modestly by 7% YoY to ₦157.7 billion, supported by strategic positioning, operational efficiency, and improved cost discipline. The company’s recovery reflects enhanced resilience post-deregulation, with earnings benefitting from a reversal of prior year FX losses and gains in other income. While margins remain thin, Eterna’s integrated operations across retail, aviation fueling, lubricants, and LPG provide diversification. Key upside potential lies in cost optimisation, lubricant segment growth, and strategic partnerships, but macroeconomic pressures, low margins, and FX volatility remain significant risks.

Key Strengths

1. Return to Profitability

  • Pre-tax Profit: ₦1.57 billion (H1 2025) vs ₦3.57 billion loss in H1 2024.
  • Net Profit: ₦574 million, translating to EPS of ₦0.44 compared to a loss per share of ₦3.71 last year.

2. Revenue Growth Despite Industry Challenges

  • Revenue rose 7% YoY to ₦157.7 billion, driven by improved operational execution and strategic positioning in the deregulated downstream market.

3. Cost Discipline and FX Risk Mitigation

  • Other income of ₦575 million cushioned costs, contrasting sharply with the ₦14.5 billion FX loss in H1 2024, highlighting effective risk management.

4. Diversified Business Model

  • Presence across retail marketing, aviation fueling, lubricants, LPG, and commercial fuel sales strengthens resilience and positions Eterna for growth opportunities in Nigeria’s evolving energy sector.

5. Focus on Energy Transition and Digital Transformation

  • Ongoing investments in operational efficiency, digital platforms, and sustainability initiatives align with Nigeria’s energy transition goals and enhance competitive positioning.

Key Weaknesses & Risks

1. Thin Margins Amid Deregulation Pressure

  • Gross Profit Margin: 4%, highlighting persistent pricing pressure in a deregulated environment.
  • Structural margin compression could limit earnings growth without significant cost reductions or value-added services.

2. Macroeconomic & FX Risks

  • Exposure to currency volatility and high inflation remains a critical challenge for import-dependent operations.

3. Competitive Downstream Market

  • Intense competition in retail and lubricants segments may constrain pricing power and profitability.

4. Execution Risk in Strategic Growth Plans

  • Expansion into new revenue streams requires effective execution and strong working capital management in a high-interest-rate environment.

Industry Context

Nigeria’s downstream oil sector has entered a post-deregulation phase, creating both opportunities and challenges. While deregulation eliminates fuel subsidies, it exposes operators to market-driven pricing volatility. Eterna’s integrated operations and lubricant segment competitiveness position it to capture value, but success will depend on cost efficiency and FX risk management.

Outlook and Strategic Priorities

  • Maintain earnings momentum through operational efficiencies and cost control.
  • Leverage lubricants and LPG segments for margin improvement.
  • Deepen digital transformation to enhance customer engagement and distribution efficiency.
  • Explore strategic partnerships to strengthen capital base and expand footprint.

Investment View

Eterna Plc’s H1 2025 performance signals a successful turnaround and renewed stability, supported by strategic agility and diversified operations. While low margins and macroeconomic uncertainty present headwinds, the company’s resilient earnings, improving EPS, and cost optimisation efforts offer a cautiously positive outlook. For long-term investors, Eterna represents a moderate-risk recovery play in Nigeria’s energy sector, contingent on effective execution of strategic priorities and FX risk mitigation.

Disclaimer

The user WaneInvestmentHouse holds no position in NGSE:ETERNA. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.