January 30, 2024/Cordros Report
The Okomu Oil Palm Plc (OKOMUOIL) published its Q4-23 unaudited results yesterday (January 29), reporting a standalone EPS of NGN0.26 (vs loss per share of NGN0.79 in Q4-22), bringing 2023FY EPS to NGN22.19 (2022FY: NGN18.17). We attribute the improved earnings to the sturdy revenue growth (+58.2% y/y) in the period.
Revenue increased by 58.2% y/y in Q4-23 (2023FY: +26.6% y/y) underpinned by a broad-based increase across local (+58.8% y/y | 82.6% of revenue) and export (+55.1% y/y | 17.4% of revenue) sales. We highlight that the higher sales print was driven by the effect of the local currency devaluation on Crude Palm Oil (CPO) prices, which triggered an increase in local CPO prices. Meanwhile, revenue came in lower on a quarter-on-quarter basis, declining by 58.5% on the back of weaker sales in local (-30.8% q/q) and export (-14.7% q/q) segments.
Gross margin (-88bps y/y) declined to 39.7% in Q4-23 (Q4-22: 40.6%) as cost of sales grew by 60.5% y/y, influenced by higher energy costs. However, the operating margin grew by 21.70ppts y/y to 22.8% (Q4-22: 1.1%), as OPEX-to-sales ratio fell to 16.9% (Q4-22: 41.6%).
OKOMUOIL recorded a net finance income of NGN366.05 million in Q4-23 (vs net finance cost of NGN1.89 billion in Q4-22), following a significant increase in finance income (+432.0% y/y) amid a contraction in finance cost (-116.4% y/y). The higher finance income was facilitated by a substantial increase in exchange gain (NGN653.45 million | Q4-22: NGN23.09 million). Elsewhere, the contraction in interest on long-term loans (-79.7% y/y to NGN206.55 million) and exchange loss (-89.0% y/y to NGN82.32 million) triggered the movement in finance cost.
Overall, profit before tax settled at NGN3.63 billion in Q4-23 (vs loss before tax of NGN1.70 billion in Q4-22). Following a tax expense of NGN3.38 billion, profit after tax came in at NGN245.98 million (vs loss after tax of NGN749.39 million in Q4-22).
Comment: OKOMUOIL’s performance was impressive, as it aligns with our anticipated outcomes, driven by higher pricing, amid a steady growth in volumes. We anticipate further improvement in the company’s earnings in 2024FY, driven by top-line expansion supported by favourable factors such as the upside for Nigerian CPO planters, especially amidst foreign exchange liquidity challenges, which we believe will positively impact the company’s earnings. Additionally, higher volumes, facilitated by the upgrade of the milling capacity at Okomu II, are expected to contribute to this growth. Our estimates are under review.
