CPO Price boon spur Okomu Oil to growth as margins surge 


The central bank’s pronouncement on Crude Palm Oil (CPO) gave Okomu Oil Nigeria Plc a life line as sales surged and margins expanded on the back of demand from competitors squeezed by the new rules.
Oil palm producers are one of the best performers on the NSE in 2016 as investors bet that their aggressive expansion plans will translate to growth.
For the year ended December 2016, Okomu Oil’s net income surged by 85.28 percent to N4.91 billion from N2.65 billion the previous year.
Sales increased by 47.58 percent to N14.36 billion as the company continues to intensify on its aggressive expansion plans with a view to consolidating its position in the market.
Okomu Oil’s net margin, a measure of profitability and efficiency jumped to 34.19 percent in the period under review as against 27.23 the as at December 2015.

The Nigerian oil palm producer has utilize the resources of its owners in generating higher profit as return on equity (ROE) increased to 28.81 percent in December 2016 from 24.82 percent as at December 2015.

In order to protect depleting external reserves from the continued fall in oil price since mid-2014, the Apex banned importers of 41 including palm oil and textile, from accessing official foreign exchange markets last year.

Also, the currency weaknesses as a result of the adoption of flexible exchange rate regime by the Abuja based bank and the bullish trend in CPO prices left importers with no option than to patronize local producers.

“In the aftermath of CBN policy pronouncement regarding CPO imports, domestic prices surged 144% over 2016 to N661.4/kg a importers who account for 29% of local supply cutback on imports,” said analysts at ARM Research in a recent report.

CPO price was in an upward trajectory as it spiked to N650 per kilogram in December 2016 from N273 as at December 2015, according to the ARM Research report.

Nigeria, Africa’s most populous nation was once the largest exporter of CPO in the 60’s but the discoveries of black gold in the early seventies resulted in neglect of the palm sector.

According to recent report by USAD, Indonesia’s total production for 2016 was 35 million metric tonnes, Malaysia; 19.50 million metric tonnes, others; 4.94 million, Thailand; 2.30 million metric tonnes, Columbia; 1.14 million metric tonnes, and Nigeria, 970,000.

Okomu Oil’s share price closed at N52.51 as of 2:00pm on the NSE, valuing the company at N50.09 billion. Ytd returns were 30.72 percent outperforming the NSE ASI Index of -5.02 percent.

The subsisting FX ban on imported CPO at the interbank market leaves importers subjected to the vagaries at the parallel market, according to analysts at ARM Research.

BALA AUGIE