FSDH Initial Reaction: Okomu Oil 3Q22 results
Kindly click here to download the report.

November 4, 2022/FSDH Research

Key Performance Highlights:

• Okomu Oil published its unaudited 3Q22 numbers, with a solid YoY revenue growth of 27.0% YoY to N9.4 billion in 3Q22. The revenue growth was primarily driven by a 52.4% YoY jump in local sales (89.2% of 3Q22 sales), partially offset by a 46.7% YoY decline in exports (10.8% of 3Q22 sales).
   
• Cost of sales shot up 289.0% YoY to N4.7 billion in 3Q22, resulting in a sharp contraction of 3377 bps YoY in the gross margin to 49.9% in 3Q22. The cost of sales rose sharply due to a whopping 4.7x YoY increase in palm oil cost of sales (98.3% of the 3Q22 cost of sales) to N4.6 billion, while rubber cost of sales (1.7% of the 3Q22 cost of sales) declined 65.3% YoY to N81.6 million in 3Q22. The company faced elevated cost pressures in 3Q22 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 13.5% YoY to N3.3 billion in 3Q22 versus N3.9 billion in 3Q21. Consequently, the operating profit slumped 41.9% YoY from N2.4 billion to N1.4 billion in 3Q22.
   
• The company recorded a finance income of N1 million in 3Q22 compared to N50 million in 3Q21, primarily due to significantly reduced interest on fixed deposit of N1.2 million versus N50.2 million in the prior year quarter. The finance cost for the period stood at N179 million in 3Q22 versus N30 million in 3Q21, driven by an 11.5x jump in the interest on long-term loans to N160.4 million from N13.9 million in 3Q21, resulting in a net finance cost of N179 million in 3Q22 against N20 million in 3Q21. However, the company charged an income tax credit of N24 million in 3Q22, compared to an income tax expense of N303 million in 3Q21.
   
• The company reported a net profit of N1.2 billion in 3Q22 against N2.1 billion in 3Q21. Okomu reported earnings per share of N1.27 compared to N2.17 in 3Q21. The company’s EBITDA and operating margins contracted by 1643 bps and 1718 bps YoY, to 24.7% and 14.5%, respectively, in 3Q22. The net profit margin also declined 1500 bps YoY to 12.9% in 3Q22.
   
• On a sequential basis, the revenue declined 53.5% in 3Q22. The cost of sales decreased 30.4% QoQ, further deteriorating the gross profit to N4.7 billion in 3Q22 from N13.5 billion in 2Q22. The company recorded a 3.3% QoQ drop in net operating expenses, partially offset by a 2.8% QoQ rise in net finance cost, resulting in an 87.9% QoQ decrease in profit before tax to N1.2 billion in 3Q22 from N9.9 billion in 2Q22. This decrease was partially offset by an income tax credit of N24 million in 3Q22 versus an income tax expense of N2.5 billion in the prior quarter. Consequently, the company reported an 83.5% QoQ decline in net profit to N1.2 billion in 3Q22.
   
• Okomu Oil Palm Company Plc has announced an interim dividend of N2.00 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 15th November 2022.

Market Reaction: Investor reaction to the 3Q22 results was subdued as the stock remained unchanged at N169.50 versus a 0.21% loss in the All-Share Index (1/11). Moreover, the stock closed flat even on Wednesday (2/11) versus a 1.23% increase in the All-Share Index.

Okomu Oil Earnings Highlight 3Q22

Source: Company Financials, FSDH