FSDH Initial Reaction: Okomu Oil 1Q24 results
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April 30, 2024/FSDH Research

Key Performance Highlights:

• Okomu Oil maintained its growth momentum in 1Q24, with the revenue surging 79.6% YoY to N43.5 billion in 1Q24 compared to N24.2 billion in 1Q23. The revenue growth during 1Q24 was powered by a 72.5% YoY jump in Local Sales to N39.3 billion (90% of 1Q24 sales), further boosted by Export sales (10% of 1Q24 sales) which grew  193.6% YoY to N4.2 billion.
   
• Cost of Sales shot up 135.1% YoY to N10.3 billion in 1Q24 compared to N4.4 billion in 1Q23 owing to a 204.2% YoY jump in Oil Palm cost to N9.6 billion (93% of the 1Q24 cost of sales), partially offset by the lower Rubber cost of N0.8 billion in 1Q24, down 39.2% YoY. However, the gross profit soared 67.3% YoY to N33.2 billion. Despite the net operating expenses rising 78.0% YoY to N8.3 billion from N4.7 billion in 1Q23, Results from operating activities grew 64.0% YoY to N24.8 billion in 1Q24.
   
• In 1Q24, the Company reported a massive growth in finance income to N2.7 billion (1Q23: N1.2 million), mainly driven by Exchange gains. However, finance costs also spiralled to N4.5 billion in 1Q24, mainly due to the exchange losses. Consequently, net finance costs vaulted 609.3% YoY to 1.8 billion in 1Q24. The Company paid income tax of N8.0 billion in 1Q24, up 69.0% YoY. Ultimately, Okomu Oil’s net profit soared 48.2% YoY to N15.1 billion in 1Q24, with EPS of N15.81 per share, compared to N10.67 per share in 1Q23. However, gross and EBITDA margin contracted for 1Q24 to 76.3% (down 560 bps YoY) and 59.7% (down 714 bps YoY), respectively.
   
• Looking at the sequential performance, the Company recorded a solid 203.2% QoQ rise in revenue to N43.5 billion in 1Q24 (4Q23: N14.3 billion). The Company’s cost of sales increased 19.4% QoQ to N10.3 billion in 1Q24 (4Q23: N8.7 billion). With significantly higher revenues, Okomu reported an operating income of N24.8 billion in 1Q24 against an operating income of N3.3 billion in 4Q23, a 660.4% QoQ spurt. Although the net finance cost grew to N1.8 billion in 1Q24 compared to the net finance income of N366 million in 4Q23, the Company recorded a net profit of N15.1 billion in 1Q24 versus a net profit of N246 million in 4Q23, a significant 61.3x rise.
   
• On 3 April 2024, Okomu Oil announced a final dividend of N14.00 for every ordinary share, subject to appropriate withholding tax and shareholder’s approval. The final dividend will become payable on 23 May 2024 to all shareholders registered in the Company’s books at the close of business on 25 April 2024.

Market Reaction: The investor reaction to the robust 1Q24 results was muted as the Okomu stock remained unchanged at N232.50, versus a 0.35% gain for the All-Share Index on 30/4.

Okomu Oil Earnings Highlight 1Q24

Source: Company Financials, FSDH