The top palm-oil producers Okomu Palm Oil Company and Presco Plc are ready to reinvest any earnings they accrue in order to accelerate growth needed to restore the past glory of a sector relegated due to the discovery of crude oil in commercial quantities in the sixties.
Both have been recording strong earnings, taking advantage of government policies such as the border closure undermining their competitors who were flooding the market with cheap and substandard products and magnified patronage for their products.
Okomu and Presco beat analysts’ expectation even as there were fears that the border reopening and nonexistence of an anti-smuggling deal with neighbouring West African governments would exacerbate the downsides for local manufacturers.
The combined revenue of these firms spiked by 79.02 percent to N84.68 billion in December 2021 from N84.68 billion, data gathered by MoneyCentral shows.
They generated profit from core operations as cumulative operating profit surged by 108.02 percent to N40.46 billion as at December 2021 from N19.45 billion the previous year.
Combined net income surged 152.37 percent to N31.91 billion in the period under review as against N13.04 billion the previous year.
Interestingly, the crude oil palm (CPO) and rubber for Okomu exports grew in 2021, which added impetus to revenue.
Okomu’s operating profit margin increased to 42.98 percent from 38.05 percent the previous year while Presco’s operating profit margin rose to 51.58 percent in the period under review from 44.15 percent the previous year.
Both are able to use shareholders resources in generating higher profit, and they have attractive valuations and there are positive prognoses that the upside in price of CPO and rubber as well as local demand will continue to support earnings.
Okomu’s average return on equity increased to 33.17 percent in December 2021 from 22.37 percent as at December 2020.
Presco’s return on average equity jumped to 40.21 percent in the period under review from 16.95 percent the previous year.
It is important to note that these firms have strong balance sheets, and a robust cash flow indicates they have the financial strength to settle debt, pay dividend and fund expansion plans.
Okomu has a dividend yield of 5.63 percent while its shares trade at a price to earnings ratio of 7.88 times.
Presco has a year to date return in its stock price of 18.45 percent.