Export sales leads Okomu Oil’s 60% turnover growth in 2021

Export sales provided the drive for a 60 per cent advance in sales revenue for Okomu Oli Palm Plc to N37.5 billion in the 2021 financial year. The oil palm and rubber producing company raised export sales by over 91 per cent to N5.6 billion to provide the spur for the company’s outstanding performance in the year.

Domestic sales also recorded a strong growth of 55.6 per cent to nearly N32 billion at the end of the year, accounting for 85 per cent of the company’s turnover at the end of 2021. The company’s products are palm oil, palm kernel, banga and rubber cup lumps.

The company, which is largely owned by the Socfinal Group of Luxembourg [62.6 per cent], recorded one of its most impressive earnings stories in 2021. It combined the strong growth in sales revenue with a significant slowdown in costs.

The favourable combination provided room for a major gain in profit margin and outstanding growth in profit. The oil palm and rubber producing company closed the 2021 operations with an after-tax profit of N14 billion.

The figure represents a top record growth of 80 per cent over the preceding year’s profit of N7.8 billion. The performance has maintained an upswing in profit for the company for the second year, having suffered profit drops for two years to close at N5.4 billion in 2019.

Improved ability in converting enhanced revenue into profit underlies the highly improved earnings results for the company in the year.

The company raised profit margin from 33.2 per cent in the preceding year to 37.5 per cent at the end of the 2021 financial year. The gain in profit margin reflects the ability to grow sales revenue well ahead of costs and this happened in all key cost lines of the company in the year.

The company continues to reap an operating advantage of relatively low input cost, which provides a large cost-saving area. Cost of sales grew by 51.4 per cent to N11.6 billion at the end of the year, which is well below the 60 per cent growth in turnover.

This means a reduction in the cost of producing the naira of sales the company recorded in the year. Input cost per naira of sales revenue went down from 33 kobo at 31 kobo over the review period while revenue grew.

The relative decline in cost of sales powered gross profit, which rose ahead of sales at 64 per cent to roughly N26 billion at the end of the year.

Net operating costs also slowed down at an increase of 42.5 per cent to N9.7 billion at the end of the year. The slowdown in operating expenses pushed up operating profit by almost 81 per cent to over N16 billion at the end of the year.

Further operating strength came from a net finance income of over N187 million in 2021 compared to net finance expenses of N63 million in the preceding financial year. Finance income exceeded finance expenses at N380 million compared to N193 million.

The company carries bank loans in excess of N12 billion on its balance sheet.

Combining rapid growth in sales revenue with the slowdown in costs is the winning strategy for the elevated earnings performance for Okomu Oil Palm in 2021.

The company has raised its cash dividend to shareholders from N7 per share in 2020 to N8 per share for the 2021 trading.