Eternal Oil Plc exceeded its Q1 2025 profit forecast, reporting a pre-tax profit of N1.4 billion, significantly higher than its projected N756 million.
The impressive result was largely driven by the absence of foreign exchange losses, a major turnaround from the N10.688 billion FX loss recorded in Q1 2024.
This improvement underscores the positive impact of FX stability on the company’s performance and marks a strong start to the year.
While Eternal Oil has posted a solid profit for the first quarter of 2025, the performance is not entirely as it seems. The company benefitted greatly from the stabilisation of foreign exchange rates, which alleviated the FX losses that had heavily impacted its results in the previous year. However, despite the favourable FX situation, deeper structural challenges remain.
The company’s primary fuel sales continue to be a volume-driven business, with limited room for profit. Margins are extremely thin, and rising costs have outpaced revenue growth, putting pressure on gross profit and operating income. These figures indicate that Eternal Oil’s reliance on low-margin fuel sales remains a significant hurdle to sustained profitability.
While its lubricants business, which offers higher margins, plays a smaller role in the company’s overall earnings, it has not been enough to offset the impact of low-margin fuel sales. Although financing costs decreased, providing some relief, the company’s core profitability remains under pressure.
Cash flow has also weakened, and retained earnings remain in negative territory. Despite these challenges, there are positive signs: the balance sheet is strengthening, assets are growing, and shareholder equity is trending upwards. These developments suggest that Eternal Oil is on a slow but steady path to stabilisation.
The key takeaway for investors is that while Eternal Oil’s Q1 earnings surprise is welcome, it was largely driven by FX relief rather than operational improvements. For this positive momentum to continue, the company will need to focus on enhancing its margins, building greater resilience, and reducing its dependency on low-margin fuel sales.
Eternal Oil’s stock has been performing well, closing at N49.95 on April 30, 2025, marking a 106% gain year-to-date. This impressive performance makes it the eighth-best performing stock on the Nigerian Stock Exchange (NGX).
