August 1, 2023/CSL Research
Okomu Oil’s top-line slipped marginally y/y. The H1 2023 unaudited numbers showed that Revenue declined by 0.4% y/y to N40.60bn (H1 2023) from N40.76bn (H1 2022). Also, on a q/q basis, Revenue declined significantly, down 32.3% in Q2 2023 to N16.39bn from N24.21bn recorded in Q1 2023. We opine that the weak industrial and household demand for CPO, evidenced in their unsold inventories, contributed to the company’s Revenue decline of 32.3% q/q.
The Cost of Sales (adjusted for depreciation) outgrew Revenue, up 14.6 % y/y to N11.09bn (H1 2023) from N9.68bn in H1 2022 and 52.7% q/q. The company’s Gross margin declined in the reporting period to 72.7% (H1 2023) from 76.2% (H1 2022). Consequently, Gross Profit moderated by 5.1% y/y to N29.5bn from N31.07bn in H1 2022.
Operating Expenses (adjusted for depreciation) rose 33.3% y/y to N9.78bn from N7.73bn in H1 2022. EBITDA contracted by 16.9% y/y to N19.73bn (H1 2023) from N23.74bn (H1 2022). EBITDA Margin was down by 9.76ppts to 48.6% in H1 2023 from 58.2% in H1 2022 due to the poor Revenue performance.
Depreciation & Amortisation grew by 24.1% y/y to N2.12bn (H1 2023) from N1.71bn (H1 2022). The company recorded Operating Profit of N17.60bn (H1 2023), a 20.1% decline y/y. Also, Other Income from export expansion grant of N4.37bn was reported, aiding an improvement in Earnings Before Interest and Tax (EBIT) by 1.5% y/y to N24.1bn (H1 2023) from N23.74bn (H1 2022).
In H1 2023, the company’s Finance Income waned by 68% to N16m from N50m in H1 2022 as we noticed a significant decline of 53.3% in Cash and Cash Equivalents to N8.34bn (H1 2023) from N17.85bn (H1 2022). Finance Cost jumped by 237.4% to N1.21bn (H1 2023) from N358m (H1 2022), with FX revaluation loss (N702m) and interest on long-term loan (N493m) making up 58% and 40.8% respectively. Overall, Net Finance Cost was N1.19bn a 287% y/y increase.
Overall, the business reported N22.91bn in Profit Before Tax, down 2.2% compared with N23.4bn in H1 2022. The company reported Profit After Tax of N14.07bn compared with N15.12bn PAT in the corresponding period.
We retain a Buy recommendation on Okomu with a price target of N271/s. Current price is N265/s.
