October 29, 2024/Cordros Report
Okomu Oil Palm Plc (OKOMUOIL) published its Q3-24 unaudited financials after close of business yesterday (28 October), reporting growth of 72.5% y/y in Q3-24 standalone EPS to NGN8.54 (Q3-23: NGN4.95), resulting in 9M-24 EPS of NGN29.71 (9M-23: NGN21.93). The positive outturn in EPS was due to a surge in topline growth (+44.4% y/y) amid the significant uptick in finance income (+19.8x y/y).
Revenue grew by 44.4% y/y in Q3-24 (9M-24: +71.4% y/y) underpinned by growth across the export (+49.8% y/y | 54.2% of revenue) and local (+38.4% y/y | 45.8% of revenue) sales lines. We attribute the performance to the impact of naira devaluation on CPO prices. However, on a quarter-on-quarter basis, revenue declined by 8.2% primarily due to a decline in local sales (-32.6% q/q), while export sales (+28.9% q/q) increased.
Gross margin contracted by 972bps y/y to 51.1% in Q3-24 (Q3-23: 60.8%) driven by the effects of significant cost pressures (+80.2% y/y) on the company’s operations. We think the higher costs emanated from the impact of the marked currency devaluation on the cost of fertilizers amid the elevated inflationary environment. However, EBITDA (+32bps y/y) and EBIT (+157bps y/y) margins expanded to 41.3% and 37.0%, respectively following the 19.8% y/y decline in operating expenses.
Further out, OKOMUOIL recorded a net finance income of NGN712.45 million in Q3-24 (vs net finance cost of NGN777.72 million in Q3-23) following a 19.8x y/y uptick in finance income. The sharp growth in finance income was primarily driven by the substantial increase in exchange gain (+20.1x y/y to NGN2.02 billion).
Profit before tax increased by 80.6% y/y to NGN11.41 billion in Q3-24 (Q3-23: NGN6.32 billion). Following a tax expense of NGN3.27 billion (Q3-23: NGN1.60 billion), profit after tax came in at NGN8.14 billion (Q3-23: NGN4.72 billion), representing an increase of 72.5% y/y.
Comment: OKOMUOIL’s Q3-24 performance was impressive as profitability improved following the effect of naira depreciation on CPO prices. We still expect impressive topline growth to continue to shore up the company’s earnings for the remainder of the year, as we believe the aforementioned upside favouring Nigerian CPO planters will remain intact in the near term. Nonetheless, we remain cautious about the rising cost pressures, which could present downside risks to margins. Our estimates are under review.
