January 29, 2024/CSL Research

Okomu Oil Palm Plc (OKOMUOIL) in its full year 2023 unaudited results reported an impressive 26.9% y/y growth in Revenue to N74.98bn from N59.25bn (FY 2022). On a q/q basis, Revenue declined, down 28.5% in Q4 to N14.34bn from N20.05bn recorded in Q3 2023. Though we observed a decline in CPO price in Q4 2023, we believe demand may have also been low.

The Cost of Sales (adjusted for depreciation) grew 39.5% y/y to N27.61bn (FY 2023) from N19.8bn (FY 2022) and up 10.1% q/q. Even though the company’s Gross margin marginally declined to 63.2% from 66.6% (FY 2022), FY 2023 Gross Profit still maintained its uptrend, up 20.1% y/y to N47.38bn from N39.45bn FY 2022. Q/q however, Gross profit declined significantly.

Operating Expenses (adjusted for depreciation) rose 19.7% y/y to N17.3bn from N14.45bn in FY 2022 due to the current high-cost business operating environment. EBITDA was up 20.3% y/y to N30.1bn from N25bn (FY 2022), though EBITDA Margin was down by 2.1ppts to 40.1% from 42.2% in FY 2022. The company recorded exceptional Income of N4.3bn from Export Expansion Grant (EEG) in the year.

The company’s Finance Income increased by 330.8% to N768m from N178m in FY 2022, largely on the back of foreign exchange gain (99.3%). On the other hand, Finance Cost was up 4.7% to N2.37bn from N2.27bn (FY 2022), with FX loss (N1.39bn) and interest on long-term loan (N976m) making up 58.8% and 41.2% of the total cost respectively. Overall, Net Finance Cost came to N1.6bn, a 23.2% y/y decrease.

The business reported N28.48bn in FY 2023 Profit Before Tax, up 24.3% compared with N24.6bn in 9M 2022 and a Profit After Tax of N21.17bn compared with N17.34bn PAT in the corresponding period. Q/q, PBT was down 42.6% in Q4 2023 compared with Q3 2023.

We retain a Buy recommendation on Okomu with a price target of N272/s. Current price is N270/s.

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