Nigerian billionaire Mike Adenuga's Conoil lifts half-year profit 472% as margins widen

Conoil has delivered its strongest first half in years, lifting profit 472.5% to ₦5.15 billion, about $3.73 million, as the fuel marketer chaired by Mike Adenuga widened margins and cut distribution costs by more than half.

Revenue for the six months to June 30 rose 25.2% to ₦179.90 billion, roughly $130.2 million, from ₦143.65 billion. Pre-tax profit climbed 403.4% to ₦5.77 billion. Earnings per share reached 743 kobo against 130 kobo a year earlier.

The most telling improvement sits in the gross line. Gross profit rose 64.8% to ₦18.72 billion, or $13.5 million, from ₦11.36 billion, comfortably outpacing revenue growth. Gross margin widened to 10.4% from 7.9%, meaning the company kept considerably more of every naira it took in.

That is difficult to achieve in Nigerian downstream fuel distribution, where pricing is competitive, product costs are dollar-denominated and marketers have limited room to pass costs on. Conoil managed it while growing volumes.

Cost discipline reinforced the gain. Distribution expenses fell 55% to ₦1.05 billion from ₦2.35 billion, with freight costs cut from ₦2.24 billion to ₦949.7 million. Administrative expenses rose only 16% against revenue growth of 25%, holding overhead growth well below the expansion of the business.

Momentum built through the period. Second-quarter revenue jumped 68.4% to ₦108.44 billion from ₦64.39 billion, and quarterly profit more than doubled to ₦1.26 billion from ₦608.4 million.

The balance sheet strengthened alongside. Shareholders' funds rose 9.9% to ₦44.39 billion, about $32.1 million, and retained earnings reached ₦40.22 billion. Net assets per share improved to 6,397 kobo from 5,820 kobo. Total assets grew to ₦156.41 billion from ₦139.37 billion at the start of the year.

Conoil has been putting money into the ground rather than taking it out. Capital additions reached ₦2.45 billion in the half, including ₦1.93 billion in plant and machinery and ₦520 million in vehicles, and the company transferred ₦1.45 billion of completed work from its depot distribution facilities programme into operating assets. A further ₦5.74 billion remains under construction on that programme.

Inventory rose to ₦23.76 billion, positioning the company to serve demand rather than turn it away, and receivables grew to ₦104.26 billion as it extended credit to win volume. Conoil describes both as deliberate, attributing them to investing in inventory stock and driving sales through credit.

That strategy carries a cost the company reports openly. Finance charges reached ₦8.29 billion, roughly $6 million, exceeding pre-tax profit, on a bank overdraft that grew to ₦72.05 billion at an average effective rate of 32%. Working capital of that scale is expensive in a market where the central bank has held rates high, and the company will be looking to convert receivables into cash to bring the charge down.

Its ability to do so looks reasonable on the ageing profile. Of ₦97.68 billion in trade debtors, ₦83.01 billion is current and a further ₦8.41 billion is under 90 days. Only ₦6.22 billion sits beyond a year, and that amount is fully provided against.

White products, covering petrol, diesel, aviation fuel and kerosene, generated 98% of revenue at ₦175.94 billion, with gross profit in that segment rising to ₦18.23 billion from ₦10.11 billion. Every naira of turnover was earned in Nigeria.

Adenuga's control is undiminished. Conpetro Limited holds 516,298,603 shares, or 74.40% of the 693,952,117 in issue, unchanged on the year, leaving a free float of 25.59% that keeps Conoil compliant with the exchange's requirements for main board listings.

He drew no emoluments during the period. His daughter, Abimbola Michael-Adenuga, sits on the board as an executive director alongside chief executive Ike Oraekwuotu.

Conoil was incorporated in 1960 and markets refined petroleum products alongside lubricants and industrial chemicals across Nigeria. Adenuga acquired control of the former National Oil and Chemical Marketing Company through Conpetro and has held it since.

The directors approved the accounts on July 29 and reported no reason to doubt the company will continue as a going concern. No interim dividend was declared, with the company retaining ₦5.15 billion of earnings for reinvestment.