May 2, 2023/Cordros Report

The Okomu Oil Palm Plc (OKOMUOIL) published its Q1-23 unaudited results on Friday (April 28) reporting an EPS growth of 7.1% y/y to NGN10.67 (Q1-22: NGN9.96). The growth in EPS was driven by the strong revenue growth (+18.2% y/y) in the period.
 
OKOMUOIL’s revenue grew by 18.2% y/y to NGN24.21 billion in Q1-23 primarily driven by an increase in its local sales (+20.7% y/y | 94.1% of revenue). Meanwhile, revenue from the export sales (5.9% of revenue) line declined by 11.5% y/y. Sequentially, revenue soared by 167.0% q/q, influenced by the relatively higher CPO prices (Average CIF Rotterdam CPO price: USD906.02/mt in Q1-23 vs USD795.38/mt in Q4-22) in the period.

Gross margin contracted by 402bps to 81.9% in Q1-23 (Q1-22: 85.9%) facilitated by a faster growth in the cost of sales (+51.8% y/y) relative to revenue (+18.2% y/y). Against the preceding, the EBIT margin declined by 436bps y/y to 62.5% (Q4-22: 66.9%) amid a 20.3% y/y surge in operating expenses.

Net finance costs expanded by 92.9% y/y in Q1-23, following an 88.2% y/y increase in finance costs and a 70.0% y/y reduction in finance income. Precisely, the growth in finance costs was driven by higher interest on long-term loans (+83.3% y/y) and exchange loss (+1989.1% y/y), while the decline in interest on fixed deposit account (-11.3% y/y) and exchange gains (-99.0% y/y) pressured finance income.

Overall, the company recorded a PBT growth of 9.7% to NGN14.88 billion in Q1-23 (Q1-22: NGN13.57 billion). Following a tax expense of NGN4.70 billion, profit after tax grew by 7.1% y/y to NGN10.18 billion (Q1-22: NGN9.50 billion).

Comment: OKOMUOIL’s Q1-23 performance aligned with our expectations as the producer’s improved efficiency supported volume expansion and revenue growth. Although we believe margins will remain pressured in the year, we still expect impressive topline growth to continue to shore up the company’s earnings in 2023E. Our estimates are under review.