November 1, 2021/Cordros Report

OKOMUOIL published its Q3-21 unaudited financials over the weekend, reporting EPS growth of 108.5% y/y to NGN2.17 in Q3-21 (Q3-20: NGN1.04) and bringing 9M-21 EPS to NGN12.16 (+132.1% y/y). The growth in EPS was driven by stellar growth in top-line and a reduction in net finance costs.

Revenue grew by 45.7% y/y in Q3-21 (9M-21: +66.7% y/y), following the (1) increase in local demand which supported local sales (+30.6% y/y); and (2) company capitalizing on the global CPO deficit, growing export sales by a whopping 119.3% y/y. Pertinently, we highlight that the higher CPO prices (Average CPO price: USD1,126.83/mt in Q3-21 vs USD741.90/mt in Q3-20) in the period also supported the revenue growth. However, on a q/q basis, revenue declined by 33.0% in the quarter, following relatively lower volumes.
 
Gross margin (+475bps) increased to 83.6%, following a slower increase in the cost of sales (12.9% y/y) relative to revenue (+45.7% y/y). Against the preceding, EBIT margin rose by 324bps y/y to 31.7% (Q3-20: 28.4%) despite a 50.0% y/y increase in operating expenses.
 
OKOMUOIL recorded a positive net finance cost outturn in the period, following a 78.3% y/y reduction in finance cost and an 855.4% y/y increase in finance income. Specifically, decline in interest on long term loans (-89.6% y/y) influenced the lower finance costs, while an increase in interest on fixed deposits accounts and others (Q3-21: NGN50.22 million vs Q3-20: NGN5.28 billion) supported the higher finance income outturn.
 
Overall, the company recorded a PBT growth of 80.4% y/y to NGN2.37 billion in Q3-21 (Q3-20: NGN1.31 billion). Following a tax expense of NGN302.56 million, profit after tax printed NGN2.07 billion (Q3-20: NGN991.69 million).
 
Comment: OKOMUOIL’s Q3-21 performance remains in line with expectations in the face of improved demand (both locally and globally) and higher CPO prices. We also highlight that OKOMUOIL’s cost of sales declined by 17.0% q/q, reflecting reduced energy costs following the commissioning of its 5MW turbine in August 2021. We expect the company to sustain its stellar performance in Q4-21 and deliver strong numbers for 2021FY.