Okomu Oil Palm expects to keep profit stable at full year

The Okomu Oil Palm Company is expected to keep profit stable for the 2018 operations despite an inability to grow sales revenue. The company achieved an 86% advance in after-tax profit in 2017 from a 41% rise in turnover.

In the 2018 operations, the strength from growing sales revenue was missing as at the end of the third quarter. Nevertheless, the company is expected to keep profit up from the elevated position recorded in the preceding year.

Sales revenue closed flat for the company at the end of the third quarter trading in September 2018 but some cost savings permitted a gain in profit margin. The hope for keeping profit up is built around moderated cost behaviour in three major areas – input cost, finance cost and tax expense.

Turnover was flat for Okomu Oil Palm Company at N16.68 billion at the end of the third quarter. This reflects a quarter-on-quarter drop of 9% at the end of September.

A further slowdown in sales revenue is expected in the final quarter, which is the offseason for oil palm products. The flat position of sales revenue is therefore expected to be the end of year position for the company in 2018.

Turnover is estimated to be in the region of N20.5 billion for Okomu Oil Palm Company for the 2018 financial year. It closed the 2017 financial year with a turnover of N20.14 billion.

The company’s management succeeded in extracting an increased proportion of profit from the naira of sales revenue during the period. It ended the third quarter operations with an after-tax profit of N7.24 billion – a year-on-year growth of over 13%. This means a gain in net profit margin from 38.5% to 43.4% over the review period.

The full year outlook shows an estimated profit of N9.7 billion for Okomu Oil Palm Company for the 2018 financial year. That will be an increase of 6.5% over the preceding year’s after-tax profit of N9.1 billion.

Cost reductions in three major areas permitted the improved profit capacity the company achieved at the end of September. The first is the cost of sales, which declined by 7% against the flat position of sales revenue. That permitted some improvement in gross profit at N14.38 billion.

Finance cost also dropped by 24% at the end of the third quarter to N332 million while the biggest cost saving came from tax expense, which dropped by close to 47% to N1.48 billion. That turned a 5% decline in pre-tax profit into a 13.3% increase in after-tax profit at the end of September.

The company earned N7.59 per share at the end of the third quarter, up from N6.70 per share in the same period in 2017.

The full year earnings per share expectation is in excess of N10 for Okomu Oil Palm Company. The company posted earnings per share of N9.59 at the end of 2017 and gave out N3 per share to shareholders in cash dividend.