Despite the challenging operating environment in 2022, Conoil Plc showed tenacity by reducing costs and reporting its highest net profit margin in ten (10) years.
The oil and gas firm increased profitability by 230 basis points to 4.73 percent in the twelve (12) month period of 2022 from 2.43 percent in the corresponding period of 2021.
Data obtained from the Nigerian Exchange Group (NGX) reveal that the firm’s profit during the period soared by 101.95 percent to N6.22 billion in 2022 from N3.08 billion in 2021, the highest in 10 years, while revenue grew slowly by 3.70 percent to N131.42 billion in 2022 from N126.73 billion in 2021.
Despite accounting for 87.95 percent of the company’s total revenue during the year, the financial data show that the cost-of-sales ratio reported in 2022 is the lowest in 10 years, down by 324 basis points from 91.19 percent in 2021.
Conoil’s cost of sales grew by 0.02 percent to N115.59 billion in 2022 from N115.57 billion in 2021, despite Nigeria’s inflation hitting a 17-year high in 2022.
Its distribution expenses also declined by 4.18 percent to N2.29 billion in 2022 from N2.39 billion in 2021, however, administrative expenses were up 12.30 percent to N5.02 percent in 2022 from N4.47 billion in 2021.
Due to the high-interest rate environment in 2022 brought on by the hawkish stance of the Central Bank in an attempt to battle inflation, finance costs appreciated by 89.97 percent to N1.44 billion in 2022 from N758 million in 2021.
Total assets the oil and gas firm reported increased by 11.13 percent to N59.99 billion in 2022 from N53.98 billion in 2021, while total shareholder’s equity increased by 20.61 percent to N26.28 billion in 2022 from N21.79 billion in 2021.
Cash and cash equivalents surged from a negative balance in 2021 to N5.09 billion in 2022, on the back of an increase in net cash generated from core business activities.
Conoil reported a net cash flow from operating activities of N9.04 billion in 2022, up from N-4.56 billion in 2021, indicating that the firm generated enough cash to cover its short-term obligations during the period.
Due to the purchase of property, plant, and equipment during the period, it also reported a negative net cash flow from investing activities amounting to N72 million, while net cash flow from financing activities totaled N-3.17 billion in 2022 on the back of interests and dividends paid during the period.
Ultimately, the oil and gas company reported a 102 percent increase in earnings per share amounting to N897 per share in 2022 from N444 per share in 2021.
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What Conoil did differently during the quarters
Q1’2022 – Revenue decline, higher finance costs pressure profit
In the first quarter (Q1) of 2022, Conoil Plc’s revenue was down by 21 percent amounting to N26.15 billion from N33.09 billion in the corresponding period of 2021, with the cost of sales accounting for 89 percent of the total revenue reported.
The firm’s cost of sales declined by 24.14 percent to N23.31 billion in Q1’2022 from N30.73 billion in Q1’2021, while operating expenses grew slowly by 6.4 percent to N1.83 billion in 2022 from N1.72 billion in 2021, on the back of a 19 percent increase in distribution expenses.
Finance costs soared by 435 percent to N295 million in 2022 from N55 million in 2021. Consequently, profits grew by 31 percent to N557 million in 2022 from N423 million in 2021.
Q2’2022
In the second quarter (Q2) of 2022, revenue declined year on year (y/y) by 12.87 percent to N30.09 billion from N34.55 billion in Q1’2021, but increased quarter on quarter (q/q) by 15.07 percent from Q1’2022.
The cost of sales declined y/y by 17 percent to N26.27 billion in Q2’2022 from N31.70 billion in Q2’2021 but increased q/q by 12.7 percent from Q1’2022. The cost of sales during the period also claimed 87 percent of the firm’s total revenue.
Operating expenses grew by 9.9 percent to N1.88 billion in Q2’2022 from N1.71 billion in Q2’2021, while finance costs increased by 28 percent to N289 million in Q2’2022 from N226 million in 2021.
Consequently, profit increased by 96.5 percent to N1.25 billion in 2022 from N639 million in 2021, and q/q, profit margin grew by 202 basis points to 4.15 percent in Q2’2022 from 2.13 percent in Q1’2022.
Q3’2022
Revenue increased by 2.11 percent to N34.05 billion in the third quarter (Q3) of 2022 from N33.34 billion in Q3’2021. The figure is also an increase q/q by 13.16 percent from revenue reported in Q2’2022.
The cost of sales declined slightly by 0.75 percent to N30.27 billion in Q3’2022 from N30.50 billion in Q3’2021 and claimed 88.90 percent of total revenue.
Operating expenses grew by 1.06 percent to N1.91 billion in Q3’2022 from N1.89 in Q3’2021, bringing profit to N1.12 billion in Q3’2022, 111 percent up from N531 million in Q3’2021.
Q4’2022
Revenue increased by 20.79 percent to N41.13 billion in the fourth quarter (Q4) of 2022 from N34.05 billion in Q3’2022. The total revenue is also a 59.91 percent increase from N25.72 billion in Q4’2021.
The cost of sales claimed 86.90 percent of the total revenue during the period and grew by 60 percent y/y to N35.74 billion in Q4’2022 from N22.28 billion in Q4’2021.
Operating expenses increased by 11.05 percent to N1.69 billion in Q4’2022 from N1.90 billion in Q4’2021.
Consequently, profits surged by 127 percent to N3.29 billion in Q4’2022 from N1.45 billion in Q4’2021 bringing the profit margin to 8 percent.
