Okomu Oil Plc, Nigeria’s most capitalised oil palm maker, has a lot to cheer about despite declined profit growth, as recent government pronouncements on the importation of palm oil combined with border closure with neighbouring countries are helping the oil maker increase local sales.
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Revenue of the Edobased oil palm maker in the first nine months of this year slumped marginally by 6.8 percent to N15.5 billion, no thanks to declines in domestic sales in the first two quarters of 2019. However, with N6.97 billion recorded as revenue between July and September of this year, the company almost doubled sales when compared with N3.74 billion achieved in the corresponding period of 2018.
A breakdown of the figures showed that the increase was largely driven by an 89 percent surge in local sales to N5.95 billion from N3.14 billion, and supported by export sales which rose to N1.02 billion from N598 million in the period.
From the world’s largest exporter of oil palm in the late ’50s and ’60s, Nigeria spends close to $500 million on the importation of the commodity annually, according to Central Bank Governor Godwin Emefiele. While the importation was to meet the increasing local demands, it negatively impacted the performance of local oil palm producers
Okomu and other oil palm makers benefited from the blacklisting of some 41 items including palm oil by the Central Bank of Nigeria in 2016 when dollar shortage fostered local demand of the agro-product. But the gains were short-lived as the palm oil makers were faced with fresh challenges – robust dollar reserves following improvements in crude oil prices and smuggling activities across Nigeria’s porous borders.
To this end, Okumoil plc witnessed a 42.5 percent decline in revenue growth to N4.22 billion from N7.34 billion in the first quarter of 2019, and the trend was extended to the second quarter of the year with a 22.4 percent slump in revenue to N4.34 billion from N5.59 billion.
To curb oil palm importation, which was aberrantly affecting local producers,
President Muhammadu Buhari in June directed CBN to blacklist any firm caught smuggling or dumping palm oil into the country from all banking businesses as well as the foreign exchange market. This pronouncement was followed up with a partial border closure in August thereby bolstering local demands again.
“There was a loosening of the grip by illegal imports when the borders were closed,” Graham Hefer, Managing Director of Okomu Oil Palm, told Businessday.
“This allowed us to market our products more easily.”
Okomu’s net operating expenses, which factored in costs associated with operation such as inventory costs, employee benefits, marketing expenses, among others, grew by more than double to N3.43 billion between July and September 2019.
This worsened the company’s net operating expenses for the first nine months of this year to N7.39 billion compared with N5.63 billion recorded in the same period of 2018.
As a result, after-tax profit for the nine months stood at N4.11 billion, this is almost halved N7.24 billion net income recorded a year earlier.
However, on a quarter-on-quarter basis, the impressive growth in revenue impacted positively on the company’s bottom line as net profit rose to N1.58 billion in the third quarter of the year, this represents a 21 percent increase from the same period in 2018.
Meanwhile, Okomu recently reached an arrangement with Edo State Government in a bid to create employment opportunities and ramp up agricultural output. The company also disclosed plans to cultivate 5, 000 hectares oil palm in the state, adding that it’s poised to creating a more sustainable oil palm growth and practice.
Read Also: Okomu finalising plans to partner Edo State on Job creation, output expansion
Okomu shares closed unchanged at N54.95 per share after the close of business on the Nigerian Stock Exchange (NSE) on Tuesday. This is 36.8 percent near its 52-week low of N40.15.
The principal activities of the palm oil manufacturer are the development of oil palm plantation, palm, oil milling, palm kernel processing, and the development of rubber plantation. The company’s products include palm oil, palm kernel oil, palm kernel cake, Banga (package) and rubber cup lumps.
