October 28, 2026/Cordros Report
Okomu Oil Palm Plc (OKOMUOIL) published its Q3-26 unaudited financials yesterday (27 October), reporting a 69.1% y/y decline in standalone EPS to NGN4.15 (Q3-25: NGN13.41), bringing 9M-26 EPS to NGN45.80 (-27.6% y/y). Earnings growth was primarily weighed by gross (-25.25ppts y/y) and EBITDA (-22.80ppts y/y) margins compression, as growth in direct costs (+112.5% y/y) strongly outpaced revenue growth (+33.9% y/y).
Revenue grew by 33.9% y/y in Q3-26 (9M-26: +6.0% y/y to NGN184.35 billion) as a 41.1% y/y increase in domestic palm oil sales (90.6% of revenue) more than offset a 10.2% y/y decline in export rubber sales (9.4% of revenue). We attribute the strong domestic performance primarily to higher sales volumes, amid resilient domestic demand for palm oil. On a q/q basis, revenue declined by 11.0%, reflecting the seasonal moderation in oil palm output following the H1 production peak.
Gross margin contracted sharply by 25.25ppts y/y to 31.8% in Q3-26 (9M-26: -10.46ppts y/y to 54.0%), as cost of sales increased by 112.5% y/y to NGN40.31 billion (Q3-25: NGN18.97 billion) outpacing revenue growth (33.9% y/y). The strong growth in cost of sales was driven predominantly by higher direct costs (+128.4% y/y to NGN38.10 billion) relating to the oil palm business.
Consequently, EBIT and EBITDA margins contracted by 22.41ppts y/y and 22.80ppts y/y to 17.7% and 20.7%, respectively (9M-26: -11.27ppts y/y and -11.01ppts y/y to 38.2% and 40.9%, respectively), with pressure further compounded by an 11.3% y/y increase in operating expenses.
Below the operating line, OKOMUOIL recorded an 11.1% y/y decline in net finance cost to NGN583.96 million in Q3-26 (9M-26: -23.5% y/y to NGN1.53 billion). The decline was supported by a 16.1% y/y decline in finance costs amid a 31.1% y/y decline in finance income.
Overall, profit before tax (PBT) declined by 42.0% y/y to NGN9.88 billion in Q3-26 (9M-26: -18.1% y/y to NGN68.87 billion). Following a tax expense of NGN5.92 billion, which lifted the effective tax rate to 59.9% (Q3-25: 24.9%), profit after tax (PAT) fell more sharply by 69.1% y/y to NGN3.96 billion (9M-26: -27.6% y/y to NGN43.69 billion).
Comment: In our view, OKOMUOIL’s weak performance was primarily driven by elevated direct costs, which significantly compressed margins despite a rebound in local sales, reflecting resilient domestic demand. The sharp increase in the provision for education tax (+565.1% y/y) further weighed on earnings during the quarter. Looking ahead, we expect direct cost pressures to remain a key headwind, with effective cost management critical to restoring earnings growth amid supportive domestic demand. Our estimates are under review.
