FSDH Initial Reaction: Okomu Oil 2Q22 results
Kindly click here to download the report.

August 4, 2022/FSDH Research

Key Performance Highlights:

• Okomu Oil published its unaudited 2Q22 numbers, with a solid YoY operating performance. Revenue grew 83.1% YoY to N20.3 billion in 2Q22. The revenue growth was primarily driven by an 89.9% YoY jump in the local sales (93.8% of 2Q22 sales), further enhanced by an 18.9% YoY spurt in exports (6.2% of 2Q22 sales).
   
• Cost of Sales shot up 364.2% YoY to N6.8 billion in 2Q22, resulting in a sharp contraction of 2029 bps YoY in the Gross Margin to 66.5% in 2Q22. The cost of sales rose sharply due to a whopping 342.7% YoY increase in palm oil cost (87.0% of the 2Q22 cost of sales) to N5.9 billion, while rubber cost (13.0% of the 2Q22 cost of sales) ballooned 587.6% YoY to N881 million in 2Q22. The company faced elevated cost pressures in 2Q22 due to rising inflationary pressures in the economy coupled with the impact of the Ukraine conflict on global oil prices. However, the net operating expenses decreased 15.4% to N3.5 billion in 2Q22 versus N4.1 billion in 2Q21. Consequently, the operating profit grew 81.3% YoY from N5.5 billion to N10.0 billion in 2Q22.
   
• The company recorded a finance income of N50 million in 2Q22 compared to N2 million in 2Q21, primarily due to an N49 million exchange gain in 2Q22. The finance cost for the period stood at N223 million in 2Q22 versus N57 million in 2Q21, driven by a 12.3x increase in the interest on long-term loans to N185 million from N15 million in 2Q21, resulting in a net finance cost of N173 million in 2Q22 against N55 million in 2Q21. Furthermore, the company paid an effective tax rate of 25.6% in 2Q22, an increase from 22.2% in 2Q21.
   
• The company reported a net profit of N7.3 billion in 2Q22 against N4.3 billion in 2Q21. Okomu reported earnings per share of N7.69 compared to N4.47 in 2Q21. The company’s EBITDA and operating margins contracted by 234 bps and 48 bps, to 53.8% and 49.5%, respectively, in 2Q22. The net profit margin also declined 231 bps to 36.2% in 2Q22.
   
• On a sequential basis, the revenue edged 1.0% lower in 2Q22. The cost of sales soared 134.7% QoQ, further deteriorating the gross profit to N13.5 billion in 2Q22 from N17.6 billion in 1Q22. The company recorded an 11.4% QoQ drop in net operating expenses, partially offset by a 32.0% QoQ rise in net finance cost, resulting in a 27.3% QoQ decrease in profit before tax to N9.9 billion in 2Q22. This decrease was partially offset by a lower effective tax rate of 25.6% in 2Q22 from 30.0% in 1Q22. Consequently, the company reported a 22.7% QoQ decline in net profit to N7.3 billion in 2Q22.
   
• Okomu Oil Palm Company Plc has announced an interim dividend of N7.00 per share, subject to appropriate withholding tax and approval, which will be paid to shareholders whose names appear in the register of members at the close of business on 22nd August 2022.

Market Reaction: Investor reaction to the 2Q22 results was subdued as the stock remained unchanged at N216.90 versus a 1.35% gain in the All-Share Index (2/8). Moreover, the stock closed flat even on Wednesday (3/8) versus a 0.06% fall in the All-Share Index.

Okomu Oil Earnings Highlight 2Q22

Source: Company Financials, FSDH