Revenue moderated to NGN203.83bn (-18.20% YoY), reflecting softer product pricing and volume weakness across the white products segment. Gross profit contracted 34.71% YoY to NGN16.68bn, with gross margin down to 8.18% (9M:2024 10.25%) on weaker spreads and higher input costs. Operating profit fell to NGN8.77bn (-50.50% YoY), constrained by inflationary expense growth and tighter trading margins. Profit before tax (PBT) declined sharply to NGN1.88bn (-87.70% YoY), primarily due to a 178.48% YoY increase in finance costs to NGN6.90bn, driven by heavy reliance on overdraft facilities at an average rate of about 32%.

The surge in borrowing costs eroded operating gains and compressed profitability across the board. After a modest tax charge of NGN0.41bn (-86.84% YoY), profit after tax (PAT) closed at NGN1.46bn (-87.92% YoY), reflecting the cumulative effect of weaker margins and elevated finance expenses. Interest coverage weakened to 1.27x, underscoring tighter liquidity and higher debt-servicing pressure during the period. 

Looking ahead, whilst we expect near-term trading to stabilise, we anticipate downstream competition and elevated funding costs to remain the principal constraint on earnings. We believe the recent easing in headline inflation into September 2025 will only gradually temper operating expense growth, while high naira interest rates keep overdraft costs elevated and interest coverage tight. We expect domestic refining ramp-up and evolving pricing dynamics to sustain pressure on unit marketing margins, with volumes supported by Conoil s retail footprint and supply-chain reach.

We anticipate FX liquidity and naira volatility to remain key swing factors for working-capital intensity and import-parity costs; accordingly, we expect tighter receivables management and debt optimisation to be management s primary levers through Q4:2025. Net-net, we expect FY:2025 to deliver stable-to-slightly higher volumes but narrow margins, with any meaningful earnings recovery in FY:2026 contingent on a firmer disinflation trend, lower effective funding rates, and improved cash conversion. Therefore, we place a BUY recommendation on Conoil Plc.

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