FSDH Initial Reaction: Okomu Oil FY23 results
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January 30, 2024/FSDH Research

Key Performance Highlights:

• Okomu Oil reported strong FY23 numbers, with continued momentum as sales doubled to N75.0 billion from N37.4 billion in the last two years. However, revenue growth lowered to 26.6% YoY in FY23, compared to supernormal over 50% growth in consecutive previous two years. The revenue growth during FY23 was driven by both Local Sales and Export sales, up 24.7% and 44.7% YoY respectively.
   
• The Company’s Cost of Sales rose 39.5% YoY to N27.6 billion in FY23 compared to N19.8 billion a year ago. The rise was primarily attributable to a 42.6% YoY increase in Oil Palm cost to N23.6 billion and a 23.3% YoY rise in Rubber cost to N4.0 billion. Despite this, Gross profit grew 20.1% YoY to N47.4 billion. Although Net operating expenses increased to N17.3 billion from N14.4 billion a year ago, Results from operating activities rose 20.3% YoY to N30.0 billion in FY23.
   
• Finance Income surged from N178 million for the full year to N768 million, driven by Exchange gains. In contrast, Finance Costs slightly increased by N106 million to N2.3 billion, as the Exchange loss was more than offset by lower interest on longer-term loans. Consequently, net Finance Costs declined by 23.2% YoY to 1.6 billion in FY23. Furthermore, Okomu Oil received N4.4 billion in grants for Export Expansion during FY23 (FY22: NIL), recorded as Exceptional Income. The Company paid N11.7 billion in taxes for the year, 109.5% YoY more than last year. Okomu Oil’s Net Profit soared 22.1% YoY to N21.2 billion in FY23, with EPS of N22.19, compared to N18.17 a year ago. However, gross and EBITDA margin contracted for the second consecutive year to 63.2% (down 340 bps YoY) and 46.0% (down 252 bps YoY), respectively.
   
• Okomu Oil’s overall 4Q23 performance improved on a year-on-year basis. Revenues jumped 58.2% YoY to N14.3 billion, majorly driven by an increase in Local Sales of 58.8% YoY, representing 82% of Total Sales. Export Sales also grew 55.1% YoY to N2.5 billion. However, on a Sequential basis, the Company underperformed, with Sales down 28.5% QoQ. The Cost of Sales was higher by 60.5% YoY at N8.6 billion during 4Q23 (10.1% up on QoQ basis), reflected by increased Oil Palm and Rubber costs. Nevertheless, the Company reported an Operating profit of N3.2 billion vs. an operating loss of N97 million in 4Q22, as the Company significantly reduced operating expenses during the quarter. The Company posted a Net finance income of N366 million, driven by higher Exchange gain and lower interest on longer-term loans. However, after the tax expense of N3.3 billion, the Company posted a Net Profit of just N246 million in 4Q23, Still better compared to a loss of N749 million in 4Q22 (3Q23: N4.7 billion net profit).
   
• On January 8, 2024, Okomu Oil announced the resignation of Mr. Asue Ighodalo from the Board of the Company with effect from December 31, 2023.

Market Reaction: The Okomu stock closed unchanged at N270.0 versus a 2.22% gain for the All Share Index (29/1).

Okomu Oil Earnings Highlight FY23

Source: Company Financials, FSDH