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Okomu, Presco fail to realize border closure gains as weak demand bites

Oil palm makers on Tuesday announced significant declines in top and bottom-line, mirroring industry-wide challenges that defied gains from favourable CPO prices and border closure last year.

Okomu Oil posted its biggest profit decline in over five years as profit hit a four-year low while peer, Presco saw profit hit the lowest since 2015, although it suffered a softer decline in profit.

Okomu oil palm producer posted a profit of N5.5bn for 2019, 35.25 percent lower than it raked in the same period of 2018 while Presco announced made 8.16 percent less as profit at N3.9bn.

Both consumer goods firms noted the biggest decline in revenue in over 5 years.

“There seems to be an industry-wide problem and the results suggest weak consumer wallets pushed consumers towards unlisted brands which are cheaper compared to the listed ones,” said Oluwashina Akinremi, an agriculture analyst at Lagos-based United Capital. “However, the environment is still positive for the oil makers especially with the land borders still shut.”

The border closure, which took effect from Q3 2019, is expected to frustrate the illegal importation of banned products and CPO from neighbouring countries and boost local demand.

Okomu’s revenue in 2019 slipped 3.24 percent to N19.6bn in 2019 while Presco’s fell 6.85 percent to N19.88bn in the year.

However, revenue in the fourth quarter of 2019 jumped by 13.6 percent for Okomu Oil to N4bn but Presco suffered a double-digit decline to N5.1bn.

For Okomu Oil, exports sales improved in the year while local sales fell by 4 percent.

A breakdown could not be determined for Presco given limited information.

Gross margin of Okomu Oil fell by N4 to N70 per hundred naira sales while for Presco margin fell by N5 to N73 per N100 sales.

Cost of sales for Okomu rose nearly 10 percent paring gross profit by 7.9 percent to N13.72bn.

The company’s operating profit dropped 21.5 percent to N8bn.

Finance Cost of Okomu Oil fell by 29.2 percent while finance income fell by 71 percent.

The company noted a profit before tax of N7.98bn, 22.8 percent lower year-on-year which resulted in a profit of N5.5bn.

For the fourth quarter of the year, however, Okomu’s profit rose 10.7 percent to N1.39bn.

On the other hand, Presco’s cost of sale rose 13.4 percent to N5.391bn paring gross profit to N14.49bn compared to N16.59bn noted a year before.

The company said it had an operating profit before change in biological assets of N6.89bn, about 32.65 percent lower year-on-year.

However, a gain of N511m in the year boosted operating profit including gains from biological assets to N7.4bn, only slightly below 2018 figures.

Finance expenses for Presco rose about 47 percent to N1.88bn resulting in a profit before tax of N5.5bn versus N6.32bn from 2018.

Profit of the oil maker dropped to N3.9bn in 2019 making little of its bottom-line turn-around ( profit of N287m vs 2018 loss of N257m) in the last quarter of the year.

Okomu Oil Palm PLC develops oil palm plantation, mills palm oil, and processes palm kernel. The Company also develops rubber tree plantation.

Similarly, Presco Plc produces specialty fats and oils. The company specializes in the cultivation of oil palm and in the extraction, refining and fractioning of crude oil into finished products.

It possesses oil palm plantations, a palm oil mill, a palm kernel crushing plant and a vegetable oil refining plant in Nigeria.

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