August 01, 2025/InvestmentOne Report

Eterna Plc demonstrated a return to profitability in the first half of 2025, posting revenue growth of 6.87% to NGN157.65bn from NGN147.53bn in the corresponding period of 2024. Despite the modest top-line expansion, heightened cost pressures significantly impacted margins. Cost of sales rose notably by 15.91% year-on-year (YoY) to NGN150.75bn, driven primarily by inflationary pressures and rising import costs. Consequently, gross profit sharply contracted by 60.46% to NGN6.90bn, translating into a gross margin decline from 11.83% to 4.38%. 

For FY:2025, we are slightly optimistic on the performance of the company, primarily supported by seasonal demand cycles and sustained growth in the lubricants segment. Nonetheless, gross margins are expected to remain constrained at approximately 4-5%, due to competitive fuel pricing dynamics and ongoing cost inflation pressures. Effective management of operating expenses will be essential and reduced finance costs, supported by stable FX rates, will be crucial in sustaining growth. The anticipated NGN50bn equity raise is crucial for strengthening the balance sheet, though external risks such as FX and fuel price volatility remain significant. However, we place a SELL recommendation for Eterna.

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