Okomu oil palm nets N10bn in critical Q1 season
The company’s first quarter interim financial report for the three months ended March 2023 shows a strong earnings elevation from a final quarter loss of N1.8 billion in 2022 to maintain an outstanding profit growth for the fourth year running.
The company has kept profit advancing steadily from N5.4 billion in 2019 to N7.8 billion in 2020 and from N11.5 billion in 2021 to N16.2 billion at the end of the 2022 financial year.
The first quarter profit figure for the current financial year is an increase of 7 percent year-on-year from N9.5 billion in the same quarter in 2022 extracted from a turnover of N24.2 billion for the quarter.
Earnings growth may accelerate in the second quarter – which is the company’s peak output and earnings season for oil palm products. Thereafter, earnings slowdown rules the rest of the year.
The second half is largely the company’s off-season and its contribution to profit was negative to the tune of N607 million for the 2022 full year.
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Okomu Oil has the key advantage of being a low-cost and high-margin operator able to convert 42 percent of turnover into after-tax profit in the first quarter.
Profit margin is however down from 46.4 percent in the same quarter in 2022, reflecting a much stronger growth in turnover than profit at 18 percent compared to 7 percent.
Despite that input cost is growing much more rapidly than sales revenue for the second year, it still affords the company a lot of margins good enough for comfort.
Notwithstanding a major increase in the cost of sales at 51.7 percent to N4.4 billion in the first quarter, input costs remain relatively low at 18 percent of turnover.
That enabled the company to raise gross profit by 12.6 percent to close at N19.8 billion for the first quarter.
Net operating expenses also grew ahead of turnover at 20 percent to N4.7 billion during the quarter, which lowered the increase in operating profit to 10.5 percent to close at N15 billion.
The net operating cost has posed a challenge for the company since the last quarter of last year when it exceeded gross profit and created an operating loss for the quarter. The pressure can be expected to intensify in the second half.
Pre-tax profit amounted to N14.9 billion for the first quarter, an improvement of 9.7 percent over the review period.
Another low-cost advantage going for the company is in respect of finance expenses which stood at less than N254 million at the end of the first quarter. Its interest-bearing debt has dropped from over N11 billion at the end of last year to less than N9 billion at the end of the first quarter.
The company is free from the prevalent high-interest payment burden with its robust net cash generated from operating activities towering at N16.6 billion in the first quarter.
With comparatively quite low net cash outflows from investing and financing activities, the company saw a net cash inflow of N14.6 billion in the first quarter.
Okomu Oil Palm earned N10.67 per share at the end of the first quarter of operations, improving from N9.96 per share in the same quarter in 2022. It earned N17.02 per share at the end of 2022 operations and paid out a total cash dividend of N21 per share to shareholders.
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