The revenues of Okomu and Presco rose in the second half (July to December) of 2019, but they are not enough to lift the palm oil makers in the full year of 2019.
The closure of Nigeria-Benin border has put the kibosh on smuggling along that axis, which helped to raise the revenues of palm oil makers, but full-year results show that the firms need more than border closure to remain afloat.
Apart from low prices, smuggling of Malaysian and Indonesian oil into Nigeria has persisted in the porous borders in the northern part of the country, preventing the firms from keeping positive balance sheets in full-year 2019 despite improved second-half margins, an analyst said.
Okomu’s first-quarter (Q1) financial statement shows that revenue declined by 42.5 percent to N4.2 billion, from N7.3 billion in same period in 2018. Similarly, profit after tax declined sharply by 71 percent to N1 billion in Q1 2019 from N3.5 billion in Q1 of 2018.
The firm’s revenue declined in the second quarter of 2019 by 33.8 percent to N8.65bn, from N12.93bn in the previous quarter. Profit after tax (PAT) declined by 57.4 percent to N2.52bn.
On a year-on-year basis, turnover was down by 0.50 percent to N5.04 billion. Profit before tax was down 46.06 percent quarter-on-quarter, and 40.50 percent year-on-year.
But these turned the corner in the third quarter of 2019. According to the numbers released by Presco and Okomu, combined sales revenue nearly doubled to N11.8 billion in the third quarter of the year, from N7.7 billion in the preceding quarter.
Findings from the Q3 financial results of listed firms show that Okomu Oil Palm revenue increased massively year-on-year by 89.9 percent to N7.0 billion in Q3 2019 from N3.7 billion in Q3 2018. Presco’s revenue increased marginally by 4.3 percent to N4.8 billion in Q3 2019 from N4.6 billion in the year-earlier period.
But Okomu reported a 43.22 percent decrease in its profit after tax as at the period ended 30 September 2019.
“In the first two quarters, we had a lot of problems in having to sell our products locally,” Graham Hefer, managing director of Okomu Oil Palm, said while reacting to third-quarter results.
Hefer said that after the Nigerian government shut its land borders, the impediments to sales faded off as there was a loosening of grip by illegal imports, creating an opportunity for the company to market its products more easily.
“If you look at their performance in the third quarter, it was good compared to the first and second quarters which were terrible. So, because of the border closure, the companies’ revenue has improved,” Abiola Gbemisola, research analyst at Lagos-based Chapel Hill Denham, had said while reacting to the third quarter results.
The full-year report of Okomu Oil Palm, a key player in the industry as of December 31, 2019, showed that the company’s revenue suffered a decline, as it realised a total of N19 billion, representing a 3 percent decline from the N20 billion recorded in the corresponding period of the previous year.
The company’s gross profit also dropped marginally by 8 percent to N13.7 billion in 2019 from N14.8 billion in 2018.
Similarly, Presco, another key player, recorded deficit in revenue and gross profit. The company’s revenue dropped by 7 percent to N19 billion in 2019 from N21 billion in 2018. Its gross profit also dropped by 13 percent to N14 billion from N16 billion in the previous year, while its profit for the period dropped by 8 percent to N3.7 billion.
“Generally, it is not a bad result,” Ike Ibeabuchi, an analyst and CEO of MD Services Limited, said. “Border closure will go a long way, but consider so many issues such as high production cost, smuggling and low purchasing power of consumers, all of which would definitely affect them.”
Nigeria’s palm oil output is estimated at 900,000-1.3 million MT, experts say. Import is estimated at over N500 billion annually. With national demand of 2.1 million MT, the supply gap is around 800,000MT. Major players are Presco, Okomu and PZ Wilmar.
“The industry requires massive investments and the government has to come with policies which will support development of the oil palm industry in a holistic manner,” Santosh Pillai, managing director of PZ Wilmar, told BusinessDay in 2018.
ODINAKA ANUDU & GBEMI FAMINU
