The Okomu Oil Palm Plc Q4-24: Sturdy Revenue Growth Boost Earnings

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January 31, 2025/Cordros Report

Okomu Oil Palm Plc (OKOMUOIL) published its Q4-24 unaudited financials after the close of business yesterday (30 January), reporting a standalone EPS of NGN6.22 (Q4-23: NGN0.26), bringing 2024FY EPS to NGN35.93 (2023FY: NGN22.19). We attribute the improved earnings to the sturdy revenue growth (+82.1% y/y) and a significant increase in finance income (+373.2 y/y). 

Revenue grew by 82.1% y/y in Q4-24 (2024FY: +73.4% y/y), primarily driven by solid growth in sales – local (+65.0% y/y | 74.8% of revenue) and export (+163.2% y/y | 25.2% of revenue). We attribute the performance to the impact of naira depreciation on local CPO prices, alongside the surge in global CPO prices (Average CIF Rotterdam CPO price: USD1,097.22/mt in Q4-24 vs USD782.08/mt in Q4-23) influenced by the supply deficit in the international market. On a quarter-on-quarter basis, revenue declined by 9.8%.

Gross margin (+22.58ppts y/y) increased to 62.3%, following a slower increase in the cost of sales (+13.9% y/y) relative to revenue. We note that cost pressures emanated from the impact of the marked currency devaluation on the price of fertilisers amid the elevated inflationary environment. Consequently, EBITDA (+11.77ppts y/y) and EBIT (+14.20 ppts y/y) margins expanded to 43.9% and 37.0%, respectively, despite a whopping 172.3% y/y uptick in operating expenses.

Further out, OKOMUOIL recorded a net finance income of NGN1.72 billion in Q4-24 (Q4-23: 712.45 million) following a 373.2% increase in finance income, mainly driven by a significant increase in exchange gain (+374.1 y/y to NGN3.10 billion).

Profit before tax increased by 213.1% y/y to NGN11.37 billion in Q4-24 (Q4-23: NGN3.63 billion). Following a tax expense of NGN5.43 billion (Q4-23: NGN3.38 billion), profit after tax came in at NGN5.93 billion (Q4-23: NGN245.98 million).

Comment: OKOMUOIL’s Q4-24 performance was impressive as profitability improved due to the effect of naira depreciation and higher global CPO prices. For 2025FY, given that global CPO prices are expected to moderate due to supply recovery and softer demand, coupled with a stable FX rate, we anticipate this to impact on the level of revenue growth expected for the year. However, we expect the company to be able to push out substantial volumes to make up for the lower CPO prices. Concurrently, we note that elevated cost pressures from fertilizer and energy expenses could pose risks to margins. Our estimates are under review.

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