November 1, 2024/InvestmentOne Report
Overview of Financial Performance for 9M: 2024: Conoil’s total revenue for 9M:2024 surged by 80.69% to NGN249.13bn, up from NGN137.89bn in 9M:2023. This significant increase is primarily attributed to higher sales volumes in its core petroleum products segment, which benefitted from favorable pricing within Nigeria as fuel prices have risen. The revenue growth reflects Conoil’s market resilience and strategic pricing adjustments in response to inflationary pressures and exchange rate fluctuations. The company’s strong revenue performance highlights its ability to capture market share amidst industry competition.
Cost of Sales and Gross Profit: While Conoil experienced impressive revenue growth, the cost of sales also rose by 85.48% to NGN223.79bn from NGN120.65bn in 9M:2023. The rise in costs is attributed to the increased cost of fuel imports and logistics within Nigeria, impacted by the devaluation of the naira and heightened fuel procurement expenses. However, Conoil effectively managed its gross profit, which stood at NGN25.34bn, up 53.20% from NGN16.54bn in 9M:2023. The gross margin, calculated as gross profit over total revenue, decreased slightly to 10.17% in 9M:2024 from 12.00% in 9M:2023, indicating Conoil’s focus on maintaining competitiveness despite rising costs.
Operating Expenses and Profitability: Operating expenses showed a significant increase, with distribution expenses rising by 188.65% to NGN4.07bn from NGN1.41bn in 9M:2023. This increase was largely driven by expanded sales operations, higher transportation costs, and logistics adjustments to meet increased product demand. Administrative expenses rose moderately by 18.53% to NGN4.35bn from NGN3.67bn in 9M:2023, reflecting controlled overheads and disciplined cost management. Profit before tax grew by 30.66% to NGN14.44bn in 9M:2024 from NGN11.05bn in 9M:2023, signaling strong operational efficiency. The pre-tax profit margin, calculated as profit before tax over revenue, was 5.80%, down slightly from 8.02%
in 9M:2023, reflecting the impact of higher costs on profitability.
Tax Expenses and Net Profit: Conoil’s tax expense rose by 31.40% to NGN3.10bn in 9M:2024, up from NGN2.36bn in 9M:2023. Despite the increase in tax expenses, Conoil achieved a net profit of NGN11.34bn, a 30.43% increase from NGN8.69bn in the previous year. The net profit margin, calculated as net profit over revenue, was 4.55% in 9M:2024, down from 6.30% in 9M:2023. This decline in net profit margin is indicative of the increased cost pressures Conoil faced during the period.
Earnings Per Share (EPS) and Shareholder Value: Earnings per share (EPS) improved significantly, increasing to 1,633 kobo from 1,252 kobo in 9M:2023, representing a 30.43% rise. This growth in EPS reflects Conoil’s commitment to delivering shareholder value and profitability in a challenging market. Additionally, retained earnings increased by 36.50% to NGN40.31bn, while shareholders’ equity grew by 32.00% to NGN44.48bn, indicating a strengthened financial position and higher returns on equity for shareholders.
Balance Sheet and Financial Position: As of September 30, 2024, Conoil’s total assets were NGN96.57bn, a slight decrease of 0.93% from NGN97.48bn at the end of December 2023. Current assets remained strong at NGN91.76bn, with inventories valued at NGN31.08bn and trade receivables at NGN49.21bn. The company’s cash and bank balances stood at NGN11.46bn, demonstrating a solid liquidity position to meet operational needs. On the liabilities side, total liabilities decreased by 19.06% to NGN52.09bn from NGN64.33bn in December 2023, primarily due to a reduction in short-term borrowings. This reduction in liabilities improved the company’s debt-to-equity ratio, showcasing prudent financial management.
Outlook
In line with the economic challenges faced by the petroleum industry, Conoil Plc’s outlook is influenced by rising inflation, currency fluctuations, and global oil price volatility. Conoil’s position in the downstream petroleum sector leaves it exposed to cost pressures from foreign exchange volatility and fuel import costs. However, Conoil’s strategic focus on cost control, operational efficiency, and optimized product pricing allows it to better withstand these economic headwinds. Looking forward, we expect the company to maintain strong revenue performance supported by Nigeria’s steady demand for petroleum products. By managing cost pressures and sustaining cash flows, Conoil aims to preserve its profitability and strengthen shareholder value in an environment where economic recovery is gradual. The company’s position in the market, alongside its robust financial metrics, sets a promising path for continued growth and resilience amidst external pressures. Therefore, we place a NEUTRAL recommendation on Conoil Plc.
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