Okomu Oil Palm Plc increased its revenue by 92.3 percent year on year in second quarter of 2024, primarily driven by solid growth in sales.
Sales within Nigeria grew by 52.4 percent y/y , accounting for 89.2 percent of revenue while exports dropped by 46.7 percent y/y , representing 10.8 percent of revenue.
Financial experts at Cordros Research believe the devaluation of the local currency triggered an increase in local crude palm oil prices.
However, on a quarter on quarter basis, revenue declined by 27.5 percent .
While management is yet to provide clarity on the quarterly decline, analysts suspect that it may have been induced by lower volumes during the period.
Gross margin decreased by -23.01 points y/y to 36.1 percent, reflecting substantial cost pressures with cost of sales growing significantly by 200.5 percent y/y.
“We believe the higher costs emanated from the impact of the marked currency devaluation on the cost of fertilizers amid the elevated inflationary environment. For H1-24, gross margin printed 59.4%, representing a 13.30ppts y/y decline. Against the preceding, EBIT margin fell by 10.03ppts y/y to 18.0% (H1-24: -793bps y/y to 40.7%), further compounded by a 12.0% increase in operating expenses,” experts said.
The Edo State palm oil company recorded a positive net finance income in the period, following a significant increase in finance income to N3.50 billion (Q2-23: N14.83 million), which offset the 3.0x y/y jump in finance cost to N2.93 billion (Q2-23: N953.72 million).
Specifically, OKOMUOIL recorded a net exchange gain of N799.88 million (vs net exchange loss of N681.40 million in Q2-23), following a higher exchange gain of N3.50 billion (Q2-23: N13.73 million) and exchange loss of N2.70 billion (Q2-23: N695.13 million).
Overall, profit before tax declined by 22.3 percent y/y to N6.24 billion in Q2-24 (H1-24: +27.8% y/y to N29.27 billion).
Following a tax expense of N1.12 billion, profit after tax printed N5.11 billion (H1-23: +24.7% y/y to N20.20 billion).
According to Cordros, ” OKOMUOIL’s Q2-24 performance remains in line with expectations, given the impact of currency devaluation on CPO prices, even as the effects of the higher energy and plantation costs eroded margins. Despite headwinds, we still envisage sturdy topline growth in the ensuing quarters of 2024E to shore earnings.”
