July 29, 2024/CSL Research
Okomu Oil Palm Plc (OKOMUOIL) reported an impressive 84.8% y/y growth in Revenue for the first half of 2024, reaching N75.01bn, up from N40.60bn in H1 2023. Despite this robust performance, Revenue declined by 27.5% quarter-on-quarter to N31.53bn in Q2 2024, down from N43.48bn in Q1 2024. This decline is attributed to the company’s typical trend of peak business activities in the first quarter, making it unlikely for Q2 numbers to surpass those of Q1.
The significant growth in the company’s Revenue for H1 2024, which nearly matches the N75.11bn Revenue recorded for the entire year of 2023, can be attributed to strong local demand for crude palm oil (CPO) for both industrial and household use, along with upward adjustments in prices. Local sales accounted for 89.7% of total sales, while export sales contributed 10.3%. Additionally, the global price of CPO rose by 6.2% to US$845 per tonne during H1 2024.
The Cost of Sales for Okomu Oil Palm Plc surged by 174.6% y/y, reaching N30.48bn in H1 2024, up from N11.1bn in H1 2023. Intensified oil palm plantation activities primarily drove this increase in preparation for the dry season. As a result, the company’s Gross Profit margin fell to 59.4%, compared to 72.7% in the same period last year. Despite the decline in margin, Gross Profit continued to grow, rising by 67.3% y/y to N20.2bn from N16.2bn in H1 2023. However, on a q/q basis, Gross Profit saw a significant decline of 66.1%.
The current high-cost business environment is reflected in its Operating Expenses (OPEX) which rose by 43.6% y/y to N14.04bn from N9.78bn in H1 2023. Nonetheless, EBITDA was up 26.5% y/y to N30.49bn from N24.1bn (H1 2023) though EBITDA Margin slipped to 40.7% from 59.4% in H1 2023.
The company’s Finance Income increased by 30.1% y/y to N2.91m from N2.24m (H1 2023) due to higher interest on fixed deposits while its Finance Cost declined by 8.4% y/y to N463m from N505.2m, as its loan balance dropped by 10.2% to N8.12bn from N9.05bn as at FY 2023. Okomu recorded FX gain of N6.22bn and FX loss of N6.98bn in H1, bringing the Net FX loss to N762.2m.
The business reported Pre-tax Profit of N29.27bn, up 27.8%y/y compared with N22.91bn in H1 2023 and a Profit After Tax of N20.2bn, up 24.7% y/y.
We have a Hold recommendation on the stock. Price target of N272/s. Current price is N292/s.
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