FSDH Initial Reaction: Okomu Oil 3Q23 results
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November 6, 2023/FSDH Research

Key Performance Highlights:

• Okomu Oil reported a robust set of numbers for 3Q23. The company’s revenue soared 112.8% YoY to N20.0 billion in 3Q23 compared to N9.4 billion in 3Q22. The significant revenue growth was primarily driven by a 103.6% YoY jump in local sales (N17.1 billion, 95.4% of 3Q23 sales), coupled with a 189.0% YoY rise in exports (N2.9 billion, 14.6% of 3Q23 sales).
   
• Cost of Sales increased 66.4% YoY to N7.9 billion in 3Q23, resulting in a 1094 bps YoY expansion in Gross Margin to 60.8% in 2Q23. The cost of sales grew mainly due to a 70.5% YoY rise in palm oil cost. As the company continues to face elevated cost pressures in 3Q23, net operating expenses climbed 52.8% YoY to N5.1 billion in 3Q23. However, the operating profit vaulted 419.5% YoY to N7.1 billion in 3Q23, powered by robust sales growth.
   
• Net finance cost spurted 4.4x to N778 million in 3Q23 from N178 million in 3Q22, primarily due to an exchange loss of N610.5 million in 3Q23. Despite incurring an income tax charge of N1.6 billion in 3Q23 versus a tax credit of N24 million in 3Q22, Okomu Oil reported a net profit of N4.7 billion in 3Q23, against N1.2 billion in the prior year period, a massive 289.2% YoY rise. The company reported an earning per share of N4.95 compared to N1.27 in 3Q22.
   
• Sequentially, the company recorded a 22.3% QoQ rise in revenue to N20.0 billion in 3Q23 (2Q23: N16.4 billion), while the cost of sales was up 17.2% QoQ to N7.9 billion in 3Q23 (2Q23: N6.7 billion). With an increase in revenues, Okomu reported an operating income of N7.1 billion in 3Q23 against an operating profit of N1.4 billion in 2Q23 with an operating margin expansion of 641 bps to 35.4% on a QoQ basis. Moreover, the net finance cost declined 17.2% QoQ to N778 million in 3Q23 (2Q23: N939 million). The company recorded a net profit of N4.7 billion in 3Q23 versus a net profit of N6.0 billion in 2Q23, which was helped by an exceptional income of N4.4 billion from the Export Expansion Grant.
   
• On 30 October 2023, Okomu Oil proposed an interim dividend of N4.50 kobo per 50 kobo ordinary share, subject to appropriate withholding tax and shareholder approval. The interim dividend will become payable on 20 November 2023 to all shareholders registered in the company’s books at the close of business on 16 November 2023.

Market Reaction: The Okomu stock closed unchanged at N236.80, versus a 1.45% gain for the All Share Index (30/10).

Okomu Oil Earnings Highlight 3Q23

Source: Company Financials, FSDH