…Okomu & Presco: A tale of two palm oil giants
Okomu Oil Plc and Presco Plc, two of the largest agro-based companies on the Nigerian Exchange Group, have recorded after-tax profit growth and revenue growth in a period characterised by a challenging business environment.
The two palm oil giants were able to weather the storm of inflation and Naira depreciation as Presco Plc recorded 158 percent growth in after-tax profit in the first half (H1) of 2024. Okomu Oil Plc, on the other hand, reported 24.7 percent growth in after-tax profit in H1.
Okomu Oil recorded the fastest growth of 84.7 percent in total sales(revenue) during the period.
Presco Plc reported 83.1 percent growth, indicating that while many manufacturers struggled with losses, these two agro-based giants reported growth in their bottom lines.
While the Nigerian palm oil industry is experiencing a boom due to increased investment, demand and market activity, Henry Olatunoye, former national president of the National Palm Produce Association of Nigeria (NPPAN), highlighted a concerning trend.
He told BusinessDay that the Naira devaluation has significantly impacted the cost of essential goods in the country. “This devaluation has also made investments denominated in Naira less attractive compared to those in stronger currencies like the dollar.”
The palm oil producers raked in a total of N163.02 billion in sales for the first six months of 2024, from N88.67 billion in the similar period of 2023.
Further checks by BusinessDay revealed that Okomu Oil’s turnover grew to N75 billion from N40.6 billion, with revenue from sales in the local market (Nigeria) amounting to N67.3 billion while export sales stood at N7.74 billion.
Okomu Oil’s sales in Nigeria increased to N67.3 billion from N38.1 billion while its revenue from export sales jumped to N7.74 billion from N2.53 billion.
For Presco Plc, revenue was mainly obtained from local sales, with a growth to N88.02 billion from N48.07 billion.
Nigeria’s palm oil industry, which was a revenue spinner for the country in the 60s before the discovery of crude oil in commercial quantities, is still in its embryonic stage and it is in dire need of funding and transformation policies.
The National Bureau of Statistics(NBS) Foreign Trade in Goods Statistics report shows that palm oil is Nigeria’s 12th most imported product.
Nigeria was in the 1960’s the world’s largest palm oil producer with a global market share of about 43 percent to 60 percent, but it currently produces as dismally low as 3.5 percent globally.
According to the United States Department of Agriculture (USDA), Nigeria is the fifth largest producer of crude palm oil (CPO) with less than 2 percent of total global market production of 74.08 million MT.
“Average crude palm oil (CPO) prices in Nigeria traded at an 89.24 percent premium, from 76.54 in 2023 to global prices in the nine months of 2024, primarily due to the impact of persistent Naira weakness in the parallel market,” CardinalStone stated in a note.
Both Okomu Oil Palm and Presco are integrated agricultural companies with oil palm plantations, palm oil mills, crushing plants, and oil refining plants. They engage in the cultivation of oil palm and the extraction and refining of palm oil into finished products. They are major suppliers of specialty fats and oils to several large and medium companies.
Okomu Oil Palm, the older and the larger of the two companies, was incorporated in 1979 and listed its shares on the Nigerian Stock Exchange (NSE) in 1991, the same year Presco was incorporated.
Okomu Oil Plc share price traded at N417.7 with 6,408 volumes traded and 953.9 million shares outstanding as at 11:06 am on September 20, 2024.
Presco Oil’s share price traded at N485.4 on September 20. About 59,436 volumes were traded on that day with 1 billion shares outstanding as at 11:06 am.
Palm oil is rich in Vitamin A for good eyesight. It also fights cancer, brain disease, aging, malaria, high blood cholesterol and high blood pressure. Additionally, it is effective against cyanide poisoning, assists in weight loss as well as increasing body metabolism.
Nigeria is the largest consumer of palm oil on the African continent but compared with the low level of production it has a deficit of 1.6mmt. Palm oil producers have had to deal with insecurity and poor transportation, including high fertilizer prices, in 2024.
Okomu Oil’s cost of production for the first half of 2024 surged to N30.5 billion, from N11.1 billion in the same period of 2023. The firm invested N26.4 billion in oil palm and N1.69 billion in rubber during the period.
Presco’s cost of production increased to N22.4 billion from N16.2 billion. The firm invested N12.06 billion in the upkeep of mature plantings, harvesting and labor; mill processing, refinery and packaging cost(N7.1 billion); depreciation of property, plant, and equipment (N2.23 billion); repair and maintenance (N1 billion); and raw materials consumed (N29.5 million).
Presco’s earnings per share rose to N38.9 per share from N15.08 per share. Okomu Oil’s earnings per share increased to N21.17 per share from N16.98 per share.
Okomu Oil’s finance cost increased to N7.44 billion in the first half of 2024 from N1.21 billion in the same period of 2023 while Presco’s finance cost rose to N4.42 billion from N4.06 billion.
Nigeria imports palm oil worth $600m annually
The National Palm Produce Association of Nigeria (NPPAN) has said Nigeria spends $600 million on palm oil importation annually.
Alphonsus Inyang, national president of the association, said this in an interview with the News Agency of Nigeria, where he described the expenditure as unhealthy for national development.
He said the money could be saved and injected into the economy if the palm oil sub-sector was given due attention by successive governments.
“Nigeria which was self-sufficient in palm oil production in the past, now spends a huge amount to import the same product,” Inyang stated while adding that the reverse was the case at the moment as over 50 percent of what we consume is imported.
“At the moment, the country occupies the fifth position in the league of palm oil-producing countries after Indonesia, Malaysia, Thailand and Colombia. Nigeria may even lose the position to smaller countries that are investing heavily in the sector.
“Indonesia occupies the first position, producing 50 million metric tons, Malaysia second with 19 million metric tons, Thailand 3.28 million and Colombia 1.9 million metric tonnes,” he said.
Inyang called on the Federal Ministry of Agriculture and Food Security to support NPPAN members with seedlings to develop 250,000 hectares per year.
“Our members can plant up to 250,000 hectares per year through the association’s National Oil Palm Strategy Development Plan; all we want are inputs. The government does not need to give and develop land for us, we need seedlings, fertilizers, logistics, and implements to close this gap within four years,” he said.
There is a proposal named ‘National Oil Palm Strategy Development Plan.’ It is targeted at revitalising the palm oil industry.
This plan aims to develop 250,000 hectares of oil plantation annually which will close the gap between the demand and supply of palm oil domestically within the next four years.
