Okomu Oil Palm: Expect the biggest profit in five years

Okomu Oil Palm seems set for a big haul this year with profit headed for a five-year peak in a sustaining recovery for the third year running. The oil palm and rubber producing company is reaping the rewards of the Central Bank’s restriction of foreign exchange to palm oil importers and the reduced competition has permitted gains on the both sides of output and pricing.

The company expects a top record growth of 25% in palm products output volume this year to close in the region of 46,000 tonnes. Each gain in volume creates for the company a higher percentage growth in sales revenue and each naira gain in revenue again yields a higher percentage growth in profit than sales.

The company has opened the first quarter with a surprising year-on-year growth of 77.3% in sales revenue, amounting to N5.9 billion at the end of March.  The palm oil business is leading revenue growth, accounting for about 85% of total sales.

The full year outlook indicates sales revenue in excess of N20 billion for Okomu Oil Palm in 2017. That will be a top record expansion of about 44% from the closing sales figure of N14.4 billion the company posted in 2016. It had grown sales revenue by 47% in 2016. The full year revenue outlook is subject to a wide variation from actual due to the company’s uneven growth across quarters.

The company posted an after tax profit of N3.07 billion at the end of the first quarter, an advance of 92% year-on-year. That is already about 63% of the full year profit it reported in all of the 2016 financial year. The full year forecast indicates an after tax profit in the region of N9 billion for Okomu Oil Palm in 2017. That will mean a profit lifting of 84% for the oil palm producer, about the same margin of profit growth it achieved in 2016.

The company closed last year’s operations with an after tax profit of N4.91 billion, a sustained progress in rebuilding profit after a running fall in profit hit the lowest figure in years in 2014.

The strong growth in profit reflects significant moderation in net operating expenses, which increased by 11% to about N1.24 billion at the end of the first quarter. It provided a moderating effect to an upsurge in cost of sales. Cost of sales grew by 138% to N1.26 billion during the review period and reduced gross profit margin from over 84% in the same period last year to 78.6% in the first quarter of the current year.

Okomu Oil commands one of the highest profit margins among the companies listed on the stock exchange. Its net profit margin improved from its already leading mark of 48% in the first quarter of last year and from 34% at the end of 2016 to 52% at the end of the first quarter of this year.

The company earned N3.22 per share at the end of the first quarter compared to N1.67 per share in the same period last year. The full year projection indicates earnings per share of N9.43 per share.

It had earned N5.15 per share at the end of 2016 and has proposed a cash dividend of N1.50 per share. The company’s register of shareholders closed between 16th and 19th May while payment date is 27th June, 2017.