There was no FX loss. No surge in operating costs. Yet, Conoil’s Q1 2025 pre-tax profit collapsed by 93% to just N372 million, its lowest quarterly performance since 2021.
The primary culprit appears to be the 48% jump in short-term borrowing, funded through bank overdrafts at an average interest rate of 29.75%, nearly doubling the company’s finance costs within three months.
For a company that ended 2024 with N323 billion in revenue and a strong earnings rebound, the sudden turn is both sharp and unsettling.
Revenue declined 13% year-on-year to N79.3 billion in Q1 2023, a significant pullback for a company that had closed 2024 on a high.
Sales remained concentrated in its core white products business, accounting for 96% of total revenue, while lubricants made up the remaining 4%. All sales were generated locally, highlighting the company’s exposure to domestic market volatility.
The cost of sales dropped by 9%, but that was not enough to shield margins. Gross profit fell 43% to N5.3 billion, pulling gross margin down from 10.2% to 6.7%.
Overhead expenses remained relatively flat at N2.6 billion, yet now consume almost 50% of gross profit, a significant shift from just a year ago.
But the main pressure point was not margin erosion; it was finance cost. Conoil’s interest expense soared to N2.29 billion, up from N983 million a year ago. Primarily because Conoil borrowed more and faster.
In just three months, bank overdrafts rose by 48% to N42.4 billion, now exceeding the company’s shareholders’ equity of N39.78 billion.
For context, this means Conoil is now running with more debt than owner capital, an uncomfortable position for any company, let alone one in a low-margin, high-volume business.
According to the notes to the accounts, the company offered a single paragraph of explanation:
“Bank overdrafts are repayable on demand… average interest rate approximates 29.75%… 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’s liquidity profile offers some clues. Current assets make up 96% of total assets, but 63% of that is tied up in trade and other receivables.
Inventories rose by N10.4 billion. Receivables up by N11.47 billion, which suggests more goods were pushed out on credit, but the cash hasn’t come back.
Meanwhile, payables increased by N7.85 billion, net-net, it still meant over N14 billion in working capital was absorbed into the operating cycle in Q1 alone.
This signals a classic strain in the working capital loop: Conoil is stocking more, selling more on credit, and stretching its own payables, but not nearly enough to offset the build-up on the asset side.
This model, buying fuel, selling on credit, plugging cash gaps with expensive overdrafts, may have worked when margins were wider and borrowing was smaller. But at current volumes, rates, and cost of capital, it’s a tightrope act with little safety net.
This model, buying fuel, selling on credit, plugging cash gaps with expensive overdrafts, may have worked when margins were wider and borrowing was smaller. But at current volumes, rates, and cost of capital, it’s a tightrope act with little safety net.
Overall, this is not yet a crisis. The company still has a strong market presence and scale. But without better control over cash, credit, and capital, it risks drifting from short-term strain into long-term susceptibility.
Investor sentiment has shifted accordingly. Conoil’s share price opened in 2025 at N387.20. As of now, it has lost 39.4% year-to-date, placing it 146th on the NGX. Worse still, 29% of that loss occurred between May 20 and today, reflecting accelerating concerns.