Oando Plc – H1 2025 Financial Review: Avoid – Until Operational Turnaround is Evident

Oando Plc’s H1 2025 financials reflect volatile earnings marked by margin compression and irregular income streams. While revenue remains robust and the company posted a profit for the half-year due to one-off tax credits and finance income, the underlying core operations signal significant weaknesses. The short-term outlook remains cautious, pending sustained operational profitability and reduction of finance costs.

Strengths:

1. Resilient Revenue Base:
   • Revenue from contracts with customers stood at ₦1.72 trillion in H1 2025, a moderate 15% decline YoY. Despite global oil market uncertainties, this highlights the company’s strong top-line generation capacity.
2. Net Profit Recovery in H1 2025:
   • Despite a ₦145.7 billion pre-tax loss, Oando reported a net profit of ₦63.3 billion (up 1% YoY) due to significant tax credits of ₦209 billion.
3. Positive Net Finance Income:
   • Net finance income for H1 2025 was ₦12.97 billion, compared to a net finance cost of ₦76.41 billion in H1 2024. This turnaround was aided by a ₦158.99 billion finance income and a ₦48.1 billion reversal of prior default interest.
4. Credit Improvement:
   • A net gain of ₦197.5 billion from reversal of impairment on financial assets reflects an improvement in asset quality and recovery of previously impaired receivables.

Weaknesses:

1. Operational Losses:
   • Operating loss of ₦158.7 billion in H1 2025 (vs operating income of ₦121.9 billion in H1 2024) suggests a breakdown in core business profitability.
2. Margin Pressure:
   • Gross profit fell 28% YoY to ₦59.2 billion. Notably, the company posted a gross loss of ₦26.2 billion in Q2 2025 alone, indicating severe cost inefficiencies.
3. High Finance Cost Burden:
   • Finance costs rose by 107% YoY to ₦194.1 billion, exerting immense pressure on earnings. This remains a structural concern and reflects persistent leverage challenges.
4. Heavy Administrative Expenses:
   • Admin expenses stood at ₦117.16 billion in H1 2025, though down from ₦233.35 billion in H1 2024, still high relative to operational income and a key driver of losses.
5. Reliance on Non-Recurring Gains:
   • The H1 2025 profit was largely driven by one-off items—reversal of impairment, default interest, and tax credits. This raises concerns about earnings quality and sustainability.

Recommendation: Avoid – Until Operational Turnaround is Evident

While Oando Plc managed to report a bottom-line profit in H1 2025, it was heavily supported by non-operational and non-recurring items. The core business remains weak, with sustained operating losses, high finance costs, and cost pressures undermining profitability. Unless there is clear evidence of improved cost discipline and refinancing of debt obligations, the stock lacks a strong investment case in the near term.

Investors are advised to reduce exposure or remain on the sidelines until the company demonstrates a consistent return to operational profitability and a sustainable earnings trajectory.