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Conoil should consider raising equity · Green Ticker Tales

• 0:00
  good morning here is a walk through corn oil audited fy 2025 numbers they dropped on thursday after market closed it's an ugly set of numbers but this is not a common specific issue it's a downstream oil and gas issue because i'm looking at total nigeria numbers uh total downstream nigeria numbers and their numbers are these as well but let's look at connor numbers we had this dip in revenue we had a big spike in finance cost
• 0:27
  and that led to your drop in profit after tax and of course if your profit drops your earnings per share will drop the firm also sliced its dividend so revenue down by 6.62 percent year on year 301.7 billion naira in revenue a profit after tax of 2.17 billion naira down 75.1 percent compared to the 8.7 billion naira end uh as profits in fy 2024
• 0:55
  Earnings per share came in at 3.14 Naira for FY2025. And the firm has proposed a dividend payout of 2 Naira a share. The FY2024, the firm paid 3.50 Naira a share. So, a dividend payout is down 42.8% year-on-year. When you look at what the current price is, stock loss at 2.94, it means that your dividend yield is probably...
• 1:24
  just around uh 1.0 percent it's a rather tiny dividend yield and the key factor aside from the the deep in revenue was the spike in finance cost and when i look at it it's um due to overdrafts right uh the the the firm gave a breakdown in the notes you're paying 32 interest rates average interest rates or your overdrafts you can barely do business with that so
• 1:52
  i said in the video and i'll probably include the video link this company in my view should consider raising equity because those rates they're not going to become cheaper anytime soon see that they have to consider raising equity or see if they can work structure their operations in such a way that they can have more have more customers that that pay upfront or they have a shorter credit cycle
• 2:21
  for customers but it's kind of difficult because when you look at it it's really selling petroleum products white products um that's a huge curve what they sell even though there's a lubricant business the core of the business is petrol diesel aviation fuel and all that you're not the only player in this space so if people are giving say a credit cycle of maybe 20 days and reduce yours to 10 days then
• 2:46
  you know you're going to struggle so i think the only pathway for better numbers for this frame is probably that you look at raising equity of some sort or maybe a bond issue but when you think of it a a bond is better used for longer term projects so for for short-term projects like this or for everyday cash and carrier business to run a cash in cash out products i would say probably equity would have been a better choice
• 3:14
  if there's a way they can get cheaper financing even if it's four five percent cheaper financing to go a long way because when you look at the numbers if you had probably um dropped your finance cost even maybe 40 50 percent lower than where it is then you'd have i mean you'd say i've had a year on year dip in in in profit but it wouldn't have been as bad as this it may would have been maybe you'd have made maybe
• 3:44
  30 40 50 percent uh better profit as it is so finance costs need to go down for this firm i return assets return on equity obviously they're down came in at 1.56 percent roa for 2025 from equity at 5.5 percent so if we're going to go by where the cost of equity is probably you put your cost of equity around 25 percent uh firms are generating return on equity
• 4:13
  as less than cost of work which is not worth investing but it's definitely not investing so for fundamentally speaking i think that this is one of the this stock or this company alongside the thailand is probably one of the biggest players in this space it's and it's a tough space tough tough space the coming in of the dango refinery has put some competition for downstream oil and gas players because obviously um
• 4:41
  refined products locally are kind of competing petroleum products are priced globally so yes you might argue you're refining in Nigeria you're importing the products your price differential isn't that much but the efficiencies of that refinery can enable them to cut prices where such opportunities occur so that kind of makes the business of importing petroleum products as lucrative as it used to be you've also had a dip in consumption
• 5:11
  uh the the couple of price increases for price increases we've had in the last few years mean that people are consuming for less people are driving less so where possible consumption has gone down um consumption has gone down another key area that that uh the red flag for me was you had a big bounce in the cost of sales for lubricants now the lubricant business accounts for
• 5:41
  is i mean of the 300 plus billion in revenue 291 billion was for white products white products you're talking about petrol diesel those your normal petroleum products then you have your lubricants your engine oils and all those things uh so the lubricant business accounts for just 10 billion in um revenues but the profit margins the gross profit margins are way better i mean for fy 2024
• 6:08
  The lubricant business had a gross profit margin of 28%. The pipe product segment had gross profit margins of 7.75%. Now, for FY 2025, gross profit margins for the lubricant business fell sharply to 13.25%. And that's because you had a big increase in the cost of sales for the lubricant business, up almost 100% year on year. I mean, so if your revenue for lubricant business for FY 2025,
• 6:38
  was 10.2 billion cost of sales came in at 8.9 billion your gross profit is 1.35 billion so it's just that these firms don't do calls and this is essence of course uh how have they or if i mean never can say maybe there'll be a call or should there be a call question i'd like to know is what led to this sharp increase in cost of sales for the lubricant business big bounce increase and is this going to be current run rate um
• 7:07
  going forward that's that's a question that one has to one has to ask uh i'm always paying attention to lubricant business because the margins the profit margins are way way way better uh compared to the petroleum business if i'm looking at the gross profit margin for the white products as your petrol and co just 7.3 percent i mean it's it came down fy224 gross
• 7:35
  uh profit margins for white products was 7.75 so yeah gross profit margins came down uh white products as well but that has always been a chain profit margin uh business now for the other players it's i mean since i have all fy 225 numbers i also just put them on an excel sheet and you can see that in the video where i look at the other players uh the only outlier has been eterna and nathan i was able to
• 8:04
  to increase a profit year on year because they were able to bring down their finance cost. That was the luck that Eterna had. Of the three players, Total Energy is Konoel Eterna. I mean, Eterna is just kind of head-to-head, about par with Konoel in terms of revenue. But at the rate Eterna is going, I wouldn't be surprised if this year...
• 8:32
  eternal probably would um overtake corn oil in terms of revenue uh unfortunately the q1 numbers are out i suspect they'll be out next week so most likely what i would do at some point of the next week's training session online will be a pick of video and i just decided to put the three players together look at their q1 numbers estimates fy 2026 um eps and all those things and where they're trading at
• 9:02
  then one can do numbers so keep an eye on next week's uh pre-market videos definitely it's going to have corn oil a feature one or two of them so of the three players eternal seems to be in the best shape uh fy 2025 302.3 billion in revenue 2.9 1 billion in profit after tax now yes for eternal revenue fell fy 2025 down by 3.5 percent
• 9:30
  was a big bounce in profits, profits up by over 100%. For total energies, 767.6 billion Naira in revenue for FY 2025, loss after tax of 13.8 billion Naira. I think that in a couple of years, we most likely will see total energies, and this is the downstream.
• 9:54
  side of total operating in nigeria we most likely are going to see this firm exit i think in the next two to five years they mostly would exit uh these business who they exit to i don't know but that's that's just my thought it's a tough business now downstream oil and gas is a tough business it was a tough business before the coming of the refinery before the multiple petrol increases but it's even a tougher business now um
• 10:19
  yeah so that's pretty much about it i hope you found this useful have yourselves a lovely rest of