Improved cost control bolsters margin
In Q4’24, OKOMUOIL sustained its growth momentum, with local CPO sales surging 65% y/y to ₦19.5 billion. This was driven by rising demand and the impact of currency depreciation on local prices. On the global front, palm oil supply remained tight, pushing CPO prices up 10% y/y. This, combined with the weaker naira, significantly boosted export sales, which soared 163% y/y to ₦6.5 billion. As a result, total revenue rose 82% y/y to ₦26.1 billion.
Despite a challenging inflationary and FX environment, cost of sales grew at a much slower pace of 14% y/y to ₦9.8 billion, leading to a 23ppts y/y improvement in gross margin to 62%. Consequently, gross profit jumped 186% y/y to ₦16.2 billion. However, persistent inflationary pressures drove operating expenses 172% y/y higher to ₦6.6 billion. Nevertheless, the strong gross profit growth lifted the EBIT margin by 14ppts to 37%, with EBIT soaring 196% y/y to ₦9.6 billion.
On the finance side, finance income surged 373% y/y to ₦3 billion, largely fueled by a 4.7x increase in FX gains from export sales. However, FX losses worsened, rising 8.6x to ₦707 million, which, alongside higher borrowing costs, led to a 379% y/y increase in finance costs to ₦1.3 billion. Nonetheless PBT came in higher at 213% y/y to ₦11.3 billion. After accounting for a ₦5.4 billion tax expense, PAT surged 24x to ₦5.9 billion.
FX remains mixed bag for OKOMU For FY’24, earnings remained strong, bolstered by solid performances in both Q3’24 and Q4’24. Revenue for the year grew by 73% y/y, reaching ₦130 billion, driven by significant increases in both local (+60% y/y) and export sales (+183% y/y). For export sales, global CPO prices rose by 50% in 2024, influencing export trades for OKOMUOIL. Despite this strong revenue growth, cost pressures persisted, keeping OKOMUOIL’s gross margin stable at 63%.
What shaped the past week?
Equities: This week, the local market closed in the red, driven by broad-based losses across major indices. The ASI shed 62bps to close at 107,821.39 points, as weak investors’ sentiments filtered into the market. The Insurance sector (-4.56% w/w) led the loser’s chart , as profit-taking was seen on key names such as SUNUASSUR (-19.55% w/w), GUINEAINS (-15.79% w/w), INTENEGINS (-14.83% w/w), and PRESTIGE (-11.29% w/w). This was followed by losses in the Banking (-3.08% w/w) space, as sell-offs in key names such as ETI (-12.39% w/w), STERLINGNG (-7.56% w/w), FBNH (-4.56% w/w), ACCESSCORP (-3.40% w/w), and GTCO (-2.93% w/w) dragged the sector lower. Also, the Industrial Goods index fell by 51bps, with losses recorded in WAPCO(-3.85% w/w), while the Consumer Goods sector shed 41bps despite gains in HONYFLOUR (+4.50% w/w) and NB (+2.35% w/w). Meanwhile, the Oil & gas sector (+0.60% w/w) was the only sector to finish in the green, as investors-maintained interests in ETERNA (+3.45% w/w) and ARADEL (+2.60% w/w).
Fixed Income:
During the week, yields in the secondary market trended lower, despite tight system liquidity, signaling a new market direction. At the end of the week, yield movements were seen on the 91-Day bill (-7bps), 182-Day bill (-7ps), 364-Day bill (-18bps), 2-year note (-41bps), 3-year note (-51bps), 10-year note (-101bps), and 20-year note (-69bps). System liquidity opened on Monday at ₦726 billion negative but opened on Friday at ₦131 billion positive thus OPR shed 5.58ppts to close the week at 26.75%.
There was an FGN bonds auction this week. The FGN, through the DMO, conducted a bond auction, offering ₦350 billion but ultimately selling ₦910 billion across two tenors. The stop rates for the auction closed at 19.20% for the APR 2029 (reissuance) and 19.33% for the FEB 2031 (reissuance), compared to previous levels of 21.79% and 22.50%, respectively.
Currency: At the end of the week, the Naira appreciated by ₦0.93 w/w to close at ₦1,500.15 per dollar.
Domestic Economy: This week, Nigeria’s GDP figures showed a 3.84% growth in Q4 2024, up from 3.46% in both Q3 2024 and Q4 2023. Despite overall expansion, agriculture slowed to 1.76% (from 2.10% in Q4 2023), while industry growth dipped to 2.00% (from 3.86%). Nominal GDP reached N78.37 trillion, an 18.91% rise from N65.91 trillion in Q4 2023. For the full year, the economy grew by 3.40%, driven by the non-oil sector, improving from 2.74% in 2023. The oil sector’s GDP contribution declined to 4.60% (from 4.70% in Q4 2023 and 5.57% in Q3 2024). Average crude production stood at 1.54mbpd, slightly below 1.56mbpd in Q4 2023 but above 1.47mbpd in Q3 2024. The sector’s real GDP growth slowed sharply to 1.48%, down from 12.11% in Q4 2023 and 5.17% in Q3 2024.
Global: The last day of February was unusually volatile, as traders sought to digest multiple headlines as the session progressed. Major stock market indices advanced at first on Friday after the Federal Reserve’s (Fed) favorite inflation report came in line with expectations for the January period. Previously, there had been worries that the Personal Consumption Expenditures (PCE) report would show an uptick in inflation like the December report did. The Dow Jones Industrial Average was up 0.32%, to 43,376.33 ppts, the S&P 500 rose 0.28%, to 5,878.06 ppts and the Nasdaq Composite rose 0.16%, to 18,573.65 ppts. U.S. Treasury yields fell to new multi-month lows after a report closely tracked by the Federal Reserve showed annual inflation subsided and consumer spending slowed last month.
The European stock markets closed mixed in Fridays trading, as the Stoxx Europe 600 was up 0.11%, Germany’s DAX declined 0.25%, the FTSE 100 in London rose 0.61%, France’s CAC 40 was up 0.11%, and the Swiss Market Index gained 0.36%. In Germany, the estimated annual inflation rate for February is 2.3%, down from 2.6% the previous month while core inflation, which excludes food and energy, is estimated at 2.6%. Monthly inflation was estimated at 0.4%.
What will shape markets in the coming week?
Equity market: Looking ahead, market players are likely to focus on the tail-end of corporate earnings announcements. If strong earnings or corporate actions emerge, we could see improved risk-on sentiment and a rebound in the affected stocks. Conversely, in the absence of positive catalysts, the market may continue this range-bound, see-saw pattern, with investors remaining selective.
Fixed Income: Going into the new week, we expect the market to continue to trade in a similar pattern with investors hunting for attractive yields.
