Onome Amuge
Okomu Oil Palm PLC, a leading player in Nigeria’s palm oil industry, posted a 72.5 percent year-over-year increase in profit after tax, rising from N4.72 billion in the third quarter of 2023 to N8.14 billion, according to its unaudited financials for the third quarter of 2024.
The surge in profitability was largely driven by the impact of naira depreciation on crude palm oil (CPO) prices, which boosted the company’s revenue and margins during the period.
The company’s profit before tax (PBT) for the third quarter of 2024 also experienced a significant surge, recording 80.6 percent year-on-year increase from N6.32 billion in Q3 2023 to N11.41 billion.
During the third quarter of 2024, Okomu Oil Palm Plc’s revenue registered a 44.4 percent y/y growth, buoyed by increases in both export and local sales lines. Export revenues, which accounted for 54.2 percent of the total, soared by 49.8 percent y/y, while local sales lines climbed 38.4 percent y/y, representing 45.8 percent of the total revenue.
While the revenue growth of Okomu Oil Palm Plc was impressive year-over-year, the quarter-on-quarter comparison painted a different picture. This is as revenue witnessed an 8.2 percent decline q/q, mainly due to a sharp drop of 32.6 percent in local sales.
On the contrary, export sales registered a positive increase of 28.9 percent q/q, indicating a contrasting trend between the local and export markets.
Okomu Oil Palm Plc also experienced a substantial contraction of its gross margin by 972 bps y/y, leading to a decline from 60.8 percent in the third quarter of 2023 to 51.1 percent in Q3’24. The contraction in gross margin was largely driven by the mounting cost pressures of 80.2 percent y/y that the company faced during the quarter.
Okomu Oil Palm Plc recorded an improvement in its financial standing in Q3’24, as it reported a net finance income of N712.45 million compared to a net finance cost of N777.72 million in Q3’23.
This shift was primarily attributed to the notable uptick in finance income, which grew by 19.8x y/y. The sharp rise in finance income was largely driven by an increase in exchange gain, which soared 20.1x y/y to N2.02 billion.
Okomu Oil Palm Plc’s financial buoyancy in the period under review continued with a 72.5 percent y/y growth in standalone Earnings Per Share (EPS) to N8.54 against N4.95 in Q3’23, culminating in nine months 24 EPS of N29.71 compared to N21.93 for the first nine months of 2023.
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).
According to Cordros Securities analysts, Okomu Oil Palm Plc’s impressive topline growth is expected to continue bolstering the company’s earnings for the remainder of 2024, primarily driven by favourable macroeconomic factors supporting Nigerian Crude Palm Oil (CPO) planters.
The Cordros Securities analysts, while acknowledging the company’s impressive topline growth, maintain a cautious stance regarding the potential downside risks to Okomu Oil Palm Plc’s margins.
