CONOIL AT N5.3BN PROFIT: CAN N280BN REVENUE FINALLY BECOME CASH FOR SHAREHOLDERS?

Conoil Plc has just done what looked impossible a year ago. Revenue N280.1 billion in nine months against N143.6 billion last year, up 95%. Gross profit N26.0 billion against N11.3 billion, up 129%. Profit after tax N5.3 billion against N900 million, up 489%. Earnings per share 765 kobo against 130 kobo. On paper, the downstream marketer that many wrote off has staged a comeback.

But the same statement that gives hope exposes why shareholders have not felt it. In the third quarter, the quarter that should have sealed the recovery, profit collapsed. Q3 revenue was N100.2 billion against N64.3 billion last year, up 55.6%, yet Q3 PBT was N206.5 million against N774.9 million, down 73.3%. Q3 PAT N152.8 million against N608.3 million, down 74.9%. EPS 22 kobo against 88 kobo. Gross margin in Q3 fell to 7.29% from 9.39% a year ago. The company sold more fuel and made less money doing it. Cost of sales swallowed 92.7% of revenue in Q3.

That single fact defines the test Conoil now faces: can it exploit the opportunities that deregulation has created and neutralize the weaknesses that have kept it as a N44.5 billion equity company sitting on N64.8 billion debt?

The opportunities are real. First, inventory is finally moving. Inventory fell 42.8% from N22.3 billion in December to N12.8 billion in September while revenue doubled. That is not a trader holding stock waiting for price increase. That is stock turning. Second, gross margin for nine months improved to 9.29% from 7.91%. In a fully deregulated pump price regime, Conoil has shown it can price, not just push volume. Third, the balance sheet is light. Property, plant and equipment is N10.6 billion, only 7% of total assets. It owns no refinery. It does not need to be capital heavy to grow.

To live up to shareholder expectation, that opportunity must be used to kill two weaknesses that have defined Conoil for five years.

The first weakness is receivables. Trade and other receivables is N113.8 billion, 81% of current assets, up N23.3 billion in nine months alone. Receivables days is 111 days. You sell fuel today and collect in almost four months. In retail downstream where transactions should be cash, that number means corporate and government credit sales that trap cash. The proof is in cash flow. Profit before tax N5.98 billion but cash generated from operations N1.67 billion, and after tax and VAT, net cash from operations N274 million against PAT of N5.3 billion. Profit is not cash. The N23.3 billion increase in receivables is exactly why cash and cash equivalents is negative N55.7 billion, worse than negative N41.9 billion in December. The bank is funding your profit.

If Conoil can exploit deregulation to insist on cash at its 300+ stations and cut credit to low-margin bulk buyers, that N113.8 billion can release N20 billion to N30 billion in 12 months. That alone would cut overdraft from N55.7 billion and cut finance cost.

Which brings the second weakness, finance cost. Finance cost is N12.98 billion in nine months against N4.76 billion last year, up 172.8%. It consumes 49.9% of gross profit. Every N100 of gross profit, N50 goes to the bank. Interest cover is 1.46 times, up from 1.24 times but still below 2.0 times distress threshold. Annualised finance cost is N17.3 billion, which is 39% of equity. Q3 annualised PBT of about N800 million cannot cover that. The threat is not theoretical. Borrowings rose 18% to N64.8 billion while cash fell to N9.09 billion. The company is paying N12.98 billion interest to keep a negative cash position.

Neutralizing this threat requires what management has not done in 2026: pay down debt with operating cash, not with new debt. The statement shows interest paid N12.98 billion, exactly equal to finance cost, meaning no capitalization, all cash out. Dividends paid zero in 2026 against N2.42 billion in 2025. That discipline saved N2.42 billion. But inventory reduction saved N9.5 billion and receivables consumed N23.3 billion. Net working capital deteriorated.

Shareholder expectation is not 765 kobo EPS. Shareholder expectation is dividend and sustainable cash. In 2025, Conoil paid N2.42 billion dividend from N900 million nine-month profit, because it had to keep faith. In 2026, with N5.3 billion profit, it paid zero. Retained earnings rose to N40.3 billion from N35.0 billion, equity to N44.5 billion from N39.2 billion, up 13.5%. Current ratio improved to 1.32 times from 1.27 times. But net cash is still negative N55.7 billion.

To live up to expectation, Conoil must do three things before December.

One, convert Q4 revenue to cash, not receivables. If Q4 maintains N100 billion revenue but receivables are held flat, cash flow from operations would jump from N1.67 billion to over N15 billion.

Two, use that cash to cut borrowings by N15 billion to N20 billion, not to buy PPE. PPE purchase was N1.0 billion in nine months against N7.6 billion last year, already disciplined. Keep it that way. Cutting debt by N20 billion cuts finance cost by N4 billion annually at 20% rate, lifting PBT by 67%.

Three, restore interest cover above 3.0 times. At N26 billion gross profit, with finance cost cut to N9 billion and distribution plus admin held at N7 billion, PBT would be N10 billion, double current. That is a PBT margin of 3.5%, still low but cash-backed.

Conoil has the capability. It has shown it can sell N280 billion fuel in a tough market. It has shown it can improve margin. What it has not shown is that N280 billion can become N5 billion cash in the bank instead of N113 billion IOU on the balance sheet. Until that happens, 765 kobo EPS is accounting, not wealth, and shareholders will keep asking why a company that made N5.3 billion cannot pay dividend, cannot reduce overdraft, and lost 75% of profit in the very quarter revenue grew 55%.