Update1: Presco and Okomu revenues rise 50% on the back of CBN’s 41 item ban

Presco and Okomu Plc, two of Nigeria’s leading producers of palm oil in the country have seen their sales and financial performance boosted significantly by the Federal Government’s ban of the importation of palm oil products into the country.  Both companies released their financial results for 2016 to the Nigerian Stock Exchange yesterday, showing significant rise in both profits and sales.

Both companies are benefiting from the Central Bank of Nigeria’s decision to ban importers from using official foreign exchange to import about 41-items into the country. Palm Oil related products are  on the list of 41-items not eligible for official FX funding.

Okomu is an indigenous agro-allied company engaged in the cultivation of oil palm, processing of fresh fruit bunches into crude palm oil for resale, rubber plantation and processing of rubber lumps into rubber cake for export.

Presco is a fully-integrated agro-industrial establishment with oil palm plantations, palm oil mill, palm kernel crushing plant and vegetable oil refining and fractionation plant. It also has an olein and stearin packaging plant and a biogas plant to treat its palm oil mill effluent.

Both Okomu Oil Palm Company Plc and Presco Plc have released their full year results for the period ended December 31, 2016. Okomu  results show  its full year revenue by 47.5 percent to N14.36billion, from N9.73billion in the year ended 2015.

Furthermore, the company’s profit before tax (PBT) rose remarkably by 103.8percent to N5.90billion from N2.89billion in 2015 while   profit after tax (PAT) increased by 84.6 percent year-on-year to N4.91billion, from N2.65billion in 2015.   This resulted in a basic earnings per share of N5.15 in 2016 up from N2.79 in 2015.

“The strong earnings performance was mainly buoyed by the Oil Palm business segment which continues to benefit from favourable government policies, particularly the inclusion of palm oil related products on the list of 41-items not eligible for official FX funding” stated analysts at Vetiva research in a note to investors.

“Following this policy, local Crude Palm Oil (CPO) prices were strong over the course of the year, up 55percent ,according to the management. We note that the naira depreciated over 65 percent in the parallel market in 2016, allowing local CPO producers to increase prices,” the analysts at Vetiva explained.

Vetiva research analysts also noted that the growth in top line sales was driven mainly by the  performance of the Oil Palm segment , which saw a revenue growth of  57 percent  to N12.1 billion during the year,  solely driven by the stronger CPO prices  “in the segment as volume growth remained relatively flat”.

The Board of Directors of Okomu Oil Palm Company Plc are proposing a final dividend of N1.50 per share against 10kobo dividend paid in 2015, beating many analysts’ estimates. The share price of the company reached a 52-week high of N52.51 last week against 52-week low of N28.80.

“We suspect that weaker competition from imports due to FX devaluation likely helped Okomu gain market share and boosted its topline”  FBNQuest analysts said.

Okomu is enjoying a very healthy gross margin of  75.2 percent from 64.8percent in 2015 while  net profit margin also rose to 34.2 percent from 27.3percent in 2015.

Similarly, Presco grew its full year revenue by 50.4percent to N15.71billion from N10.44billion in 2015 while   profit before tax (PBT) grew by 640.9percent to N31.22billion from N4.21billion in 2015.

However, the strong growth in profits for Presco was driven by biological assets revaluation gain of N20.5bn recorded in the last quarter of 2016 explained analysts at  FBN Quest.

Buoyed by the gain in the revaluation of biological assets, Presco’s pofit after tax increased by 771.7percent to N21.73billion, from N2.49billion in 2015 while  gross profit grew by 70.5percent to N11.3billion, from N6.63billion in 2015.

The board are recommending a N1.50 dividend per share which translates to dividend yield of 3.2percent. Its share price stood at N47 yesterday.

“Both companies are the main producers of Crude Palm Oil (CPO) alongside several other palm products. Their 2016 financial results were very impressive on all lines and were anticipated given that they both benefited from the recent government policy that banned importers of Crude Palm Oil (CPO) from access to FX at the inter-bank market. As local players in the industry, this gave them significant opportunity,” Sewa Wusu, Head of Research and Investment Advisory at SCM Capital Limited said in an emailed response to BusinessDay questions.

Many manufacturing companies requiring crude palm inputs have been forced to look inwards since the CBN placed a ban of importers of 41 items from using official foreign exchange to bring in those items. Even though the policy has been heavily criticised, some Nigerian companies have seen a significant take up in patronage since the ban.

 

Iheanyi Nwachukwu