October 30, 2024/InvestmentOne Report

Revenue Performance: Eterna Plc reported a significant increase in revenue for Q3:2024. Total revenue for the nine months ending September 30, 2024, reached NGN233.75bn, a notable increase of 89.57% compared to NGN123.32bn in the same period in 2023. On a quarterly basis, the company achieved NGN86.27bn in Q3:2024, compared to NGN54.03bn in Q3:2023, marking a strong quarterly growth of 59.66%. The primary drivers of this revenue growth were fuel sales, which contributed NGN74.69bn, and lubricant sales at NGN11.46bn, both showcasing strong demand.

Cost of Sales and Gross Profit: Despite the impressive revenue growth, Eterna Plc’s cost of sales also increased substantially. For the nine months ended September 30, 2024, the cost of sales amounted to NGN203.63bn, up 85.26% from NGN109.93bn in 2023. On a quarterly basis, Q3:2024’s cost of sales stood at NGN73.59bn, compared to NGN49.32bn in Q3:2023, representing a rise of 49.22%. The company’s gross profit in Q3:2024 was NGN12.67bn, a 168.51% improvement from NGN4.72bn in Q3:2023. The year-over-year gross profit growth indicates efficient cost management relative to revenue growth.

Operating Profit: Operating profit for the nine months ending September 2024 was NGN23.50bn, significantly up from NGN7.06bn in the same period in 2023, reflecting a 232.77% increase. For Q3:2024, the operating profit was NGN10.58bn, up from NGN2.21bn in Q3:2023, marking a massive 379.39% improvement quarter-on-quarter. This strong increase can be attributed to operational efficiency and enhanced margins despite the rising cost of sales.

Finance Costs and Exchange Losses: Finance costs surged considerably, with Eterna reporting NGN5.08bn in finance costs for the nine-month period, compared to NGN887.63 million in 2023, reflecting a staggering increase of 472.56%. This sharp rise was due to higher interest on loans and overdrafts. Additionally, the company reported net foreign exchange losses of NGN16.74bn for the nine months, up from NGN9.63bn in 2023, driven by currency depreciation and exchange rate fluctuations, which impacted the company’s liabilities and operating costs.

Net Profit and Earnings Per Share: Despite the challenges in finance costs and exchange losses, Eterna Plc managed to return to profitability. The company reported a net profit of NGN150.14 million for the nine-month period in 2024, compared to a net loss of NGN4.58bn in the same period in 2023. On a quarterly basis, the company achieved a net profit of NGN4.39bn in Q3:2024, compared to NGN1.31bn in Q3:2023, reflecting a significant improvement of 234.99%. Basic earnings per share (EPS) for the nine months ending September 2024 was NGN0.12, compared to a loss per share of NGN7.23 in 2023. For Q3:2024, the company recorded a basic NGN3.37, up from NGN1.00 in Q3:2023, highlighting strong earnings growth.

Cash Flow and Financial Position: Cash generated from operating activities for the nine months ending September 30, 2024, was NGN23.94bn, a marked improvement compared to the cash outflow of NGN3.76bn in the same period in 2023. This turnaround was driven by better working capital management and improved profitability. Eterna’s total assets as of September 2024 were NGN61.78bn, up from NGN59.64bn at the end of 2023. However, the company’s liabilities also increased, with total liabilities rising to NGN58.13bn, primarily due to higher borrowings.

Outlook
Eterna Plc’s financial performance showcases strong revenue and profitability growth, driven by
increased sales in fuel and lubricants, along with operational efficiencies. However, rising finance costs and exchange rate losses remain challenges that need addressing. Looking forward, Eterna’s focus on managing costs, optimizing debt, and maintaining revenue growth will be crucial for sustained profitability. The company is well-positioned for continued growth, especially with demand for fuel and lubricants expected to remain strong. However, macroeconomic factors such as foreign exchange volatility and interest rate hikes could pose risks to future performance. Therefore, we place a SELL recommendation for Eterna.

Click here to read full PDF copy of report