FSDH Initial Reaction: Okomu Oil 2Q23 results
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August 1, 2023/FSDH

Key Performance Highlights:

• Okomu Oil’s revenue fell 19.1% YoY to N16.4 billion in 2Q23 compared to N20.3 billion in 2Q22. The revenue drop was primarily driven by a 19.6% YoY fall in local sales (93.27% of 2Q23 sales), coupled with a 12.7% YoY decline in exports (6.73% of 2Q23 sales).
   
• Cost of Sales marginally dropped 1.3% YoY to N6.7 billion in 1Q23, resulting in a 741 bps YoY contraction in Gross Margin to 59.1% in 1Q23. The cost of sales fell despite a 6% YoY rise in palm oil cost (93.44% of the 2Q23 cost of sales) to N6.3 billion as the rubber cost (6. 6% of the 2Q23 cost of sales) dropped 50.1% YoY to N439 million in 2Q23. The Company continues to face elevated cost pressures in 2Q23, with Net operating expenses jumping 47.9% YoY to N5.1 billion in 2Q23. Consequently, the operating profit dropped 54.3% YoY to N4.6 billion in 2Q23.
   
• Net finance cost spurted 4.3x to N939 million in 2Q23 from N173 million in 2Q22, primarily due to an increased interest on loans that jumped to N1.2 billion in 2Q23 versus N357 million in 2Q22. The Company also reported an exceptional income of N4.4 billion from the Export Expansion Grant, which partially offset the increased net finance cost. Okomu Oil paid an effective tax rate of 24.9% in 2Q23 versus 25.6% in 2Q22, resulting in a net profit of N6 billion in 2Q23, against N7.3 billion in the prior period. Okomu reported an earning per share of N6.31 compared to N7.69 in 2Q22.
   
• Looking at the sequential performance, the Company recorded a 32.3% QoQ drop in revenue to N16.4 billion in 2Q23. The Company’s cost of sales was up 52.7% QoQ to N6.7 billion in 2Q23 (1Q23: N4.4 billion). With a drop in revenues, Okomu reported an operating income of N4.6 billion in 2Q23 against an operating profit of N15.1 billion in 1Q23. Moreover, as the net finance cost surged 275.6% QoQ, the Company recorded a net profit of N6.0 billion in 2Q23 versus a net profit of N10.2 billion in 1Q23.

Market Reaction: The Okomu stock closed unchanged at N265.00, versus a 1.10% fall for the All Share Index (31/7).

Okomu Oil Earnings Highlight 2Q23

Source: Company Financials, FSDH