Conoil profit plunges 93% amid rising finance costs, working capital strain

Conoil Plc has reported a dramatic collapse in profitability for the first quarter of 2025, with pre-tax profit plunging by 93 per cent year-on-year to N372 million — its lowest quarterly earnings since 2021.

This sharp downturn comes despite no foreign exchange losses or surge in operating costs, raising red flags among analysts and investors.

The company’s first quarter performance, released this week, revealed that the main pressure point was soaring finance costs caused by a 48 per cent increase in short-term borrowing, primarily through bank overdrafts.

These borrowings attracted an average interest rate of 29.75 per cent, more than doubling Conoil’s interest expense within three months and pushing the company’s financial structure into uncomfortable territory.

As of the end of March 2025, Conoil’s bank overdrafts had jumped to N42.4 billion, exceeding its shareholders’ equity of N39.78 billion.

This leverage imbalance marks a stark shift for a company that finished 2024 on a high note with N323 billion in annual revenue and strong earnings recovery.

According to the company’s unaudited financial statement, interest expenses surged to N2.29 billion in the first quarter of 2025, compared to N983 million in the same period last year — a 133 per cent increase.

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“Bank overdrafts are repayable on demand… average interest rate approximates 29.75 per cent… based on NIBOR plus lender’s mark-up. There is no security or pledge on the company’s assets with respect to the borrowings,” the company stated in a note to its financials.

Revenue for the first quarter of 2025 declined 13 per cent year-on-year to N79.3 billion, a notable drop for a company with a strong topline history.

The fall in revenue was not offset by a corresponding reduction in costs — cost of sales fell by 9 per cent, but gross profit still dropped 43 per cent to N5.3 billion, cutting gross margin from 10.2 per cent to 6.7 per cent.

Sales continued to rely heavily on white products, which accounted for 96 per cent of revenue, while lubricants made up the remaining 4 per cent. All sales were generated locally, underscoring Conoil’s exposure to domestic market fluctuations.

Conoil’s liquidity position also painted a troubling picture. While 96 per cent of total assets are current assets, a substantial 63 per cent is tied up in trade and other receivables — up by N11.47 billion in just three months.

Inventories also increased by N10.4 billion, while payables rose by N7.85 billion.

Overhead costs remained steady at N2.6 billion, but with margins sharply down, they now consume nearly 50 per cent of gross profit, compared to a much lower percentage a year earlier.

The company’s share price, which opened the year at N387.20, has since tumbled 39.4 per cent year-to-date, making it the 146th worst-performing stock on the NGX.