Last Update07 Aug 25
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.
Conoil Plc Q2/H1 Result: Sharp Earnings Decline Highlights Margin Pressures Amid Revenue Contraction
Conoil Plc’s H1 2025 results show a steep decline in profitability, with profit before tax plunging by 88.8% YoY to ₦1.15 billion, driven by a 20.4% drop in revenue and persistent cost-side pressures. Earnings per share (EPS) contracted sharply to ₦1.30 from ₦11.56, eroding investor value. While shareholders’ funds remained relatively stable (-1.9%) and retained earnings showed only a slight dip, the weak top-line performance and elevated operating environment suggest significant challenges to margin recovery. Without clear evidence of a turnaround in H2, investor sentiment may remain muted.
Key Financial Highlights (H1 2025 vs H1 2024)
- Revenue: ₦143.65bn (-20.4%)
- Profit Before Tax (PBT): ₦1.15bn (-88.8%)
- Profit After Tax (PAT): ₦900.4m (-88.8%)
- EPS: ₦1.30 vs ₦11.56 (-88.8%)
- Shareholders’ Funds: ₦40.39bn (-1.9%)
- Net Assets per Share: ₦58.20 vs ₦59.32 (-1.9%)
- Dividend: Nil for H1.
Key Strengths
✅ Stable equity base: Shareholders’ funds and net assets per share declined only marginally (-1.9%), signaling some balance sheet resilience.
✅ Positive retained earnings: At ₦36.2bn, retained earnings remain healthy, supporting future dividend potential once profitability improves.
Key Weaknesses & Risks
❌ Severe profitability decline: PBT and PAT down nearly 89%, reflecting margin compression and possible cost inefficiencies.
❌ Revenue contraction: -20.4% YoY due to weaker performance in key segments (likely white products).
❌ Earnings dilution: EPS at ₦1.30 is unattractive for income investors compared to prior periods.
❌ Dividend uncertainty: No interim dividend declared amid earnings weakness, likely reducing investor confidence.
Investment View
The results paint a challenging outlook for Conoil in the near term. While the balance sheet is relatively intact, earnings weakness, revenue declines, and margin pressures raise concerns about cash flow and future dividend sustainability.
- Short-Term View: Maintain a cautious stance until signs of revenue rebound and margin recovery emerge.
- Long-Term View: Investors with high risk tolerance may hold if management demonstrates credible cost control and strategic growth in higher-margin segments.
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Disclaimer
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