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Wednesday, March 29, 2023

Okomu Oil Earnings Slide on Lower Domestic Sales

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Okomu Oil Palm Company Plc has announced a 37.4 percent year on year (YoY) decline in earnings to N992 million in its third quarter (Q3) 2020 unaudited results.

The decline in profit reflected weaker sales and higher net finance costs.

Key highlights of the third quarter results

  • Okomu Oil reported a 27 percent decline in revenues to N5.1 billion in the quarter, following declines in local (-29.0% YoY) and export (-15.5% YoY) sales.
  • Gross profit margin contracted by 13.6 percentage points YoY to 78.9 percent in Q3’20 as cost of sales more than doubled (105.5% YoY) despite the decline in sales. However, gross profit margin remains robust over the first nine months of the year (+2.7ppts YoY to 88.4%) on the impact of cost improvements in oil palm and rubber segments in Half Year (H1) 2020.
  • Net Finance cost rose by 22.6 percent YoY due to higher interest payments on long term loans (+55.1% YoY) and lower interest income. The latter reflects the lower yield environment while the former appears consistent with a higher outstanding debt stock of N11.0 billion (+33.5% YoY).
  • Lower effective tax rate of 26.7 percent (-5.9% percentage points YoY) was unable to offset weaknesses elsewhere in the financials.
  • Cash generated from operations remained elevated at N6.2 billion in 9M’20 from N305 million in the corresponding period of 2019, buoyed by increased cash receipt from customers (+25.2% YoY) and lower cash tax payments.

“We note that the positive deviation of Q3’19 revenues from typical seasonality may have provided a high base that resulted in the current revenue contraction,” analysts at Cardinal Stone Partners said.

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