Okomu oil, a Nigerian oil palm-producing company, saw its finance income soar by 7,185 percent, driven by exchange gain in an economy where business losses are piling due to naira volatility.
Data from the Nigeria Exchange Group (NGX) disclosed that the company’s finance income grew from N113 million in the nine months of 2023 to N8.23 billion in the same period of 2024, aided by exchange gain which rose to N8.23 billion from N109.3 million.
This development contrasts the tales of other manufacturing companies that have been posting significant losses following the floating of the naira in June last year and the two-time devaluation of the currency, putting it at its cheapest value on record.
Finance income refers to the revenue a company generates from its financial activities, rather than its core operations. It’s essentially income earned from money-related activities.
A further analysis showed that just as the oil palm company’s exchange gain rose significantly, it also suffered a major exchange loss moving from N1.3 billion to N8 billion in nine months due to the weak naira and unstable exchange rate that’s eroding its profits.
The exchange loss saw the company’s finance cost increased to N8.75 billion from N2.08 billion.
However, the oil palm company saw a surge in its profit-after-tax, showing resilience despite the tough business climate as it grew from N21 billion in 9 M’23 to N28 billion.
Also, the firm grew its revenue by 41.6 percent as turnover for the period under review soared to N103.9 billion from N60.6 billion it recorded in the corresponding period last year.
Read also: Okomu Oil projects a 68% profit decline amid bandits’ attacks, economic woes
Okomu oil engages in both local and export sales of its products. Its financials showed the significant rise in its revenue was fuelled by its local sales which rose from N55.1 billion to N87.9 billion, highlighting a strong hold of the domestic market.
Its export sales also grew to N15.9 billion from a meagre N5.4 million in 9’M ‘23, showing a growing international expansion.
However, in the reviewed period, the company’s total cost of sales grew by 57.5 percent, reflecting an increase in the amount of production occasioned by an high inflationary environment and eroding purchasing power.
The total cost of goods produced (oil palm and rubber) increased from N18.95 billion to N44.63 billion. The financials revealed that the cost incurred in producing oil palm rose from N17.3 billion to N38 billion, representing a 54.4 percent rise in nine months.
Read also: Okomu Oil announces change in shareholders’ dividends payout date
In the same token, the company paid more in the production of its rubber products, rising from a paltry N1.6 billion to N6.5 billion, representing a huge 75.38 percent growth, suggesting the rise in prices of palm oil and rubber in markets.
During the nine-month fiscal period of 2024, Okomu’s net cash inflow increased by 17.05 percent, moving from N25.3 billion to N30.5 billion buoyed by receipts from customers grew by 38.36 percent.
Similarly, its net cash outflow from investing activities fell by 48.43 percent up from N4.46 billion to N2.3 billion due to the acquisition of plant, property and equipment (PPE) which significantly rose from N4.1 billion to N8.5 billion.
The closing balance of Cash and cash equivalents at the end of the period amounted to N5.5 billion, representing a decrease from N12.3 billion in the corresponding period of 2023.
Meanwhile, total net assets rose marginally in the reference period to N46.2 billion from N43.5 billion posted last year.
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