Okomu Oil Palm Plc reported a pre-tax profit of N6.24 billion for Q2 ending June 30, 2024, representing a 22.28% year-on-year (YoY) decline and falling short of the company’s Q2 2024 pre-tax profit forecast of N6.699 billion.
According to Okomu Oil Palm Plc’s Q2 2024 financial statements, the company reported revenue of N31.525 billion, which is 25.7% lower than its Q1 2024 revenue.
However, when examining the first half (H1) of 2024 compared to 2023, there is significant growth and optimism. The H1 2024 revenue of N75.008 billion is nearly equal to the total revenue for 2023.
Local sales continue to dominate its revenue stream, comprising about 90% of its total revenue. This indicates a strong presence and demand within the local market.
Key highlights (Q2 2024 vs Q2 2023)
- Revenue: N31.525 billion +92.33% YoY
- Cost of sales: N20.152 billion +200.51% YoY
- Gross profit: N11.373 billion +17.43% YoY
- Net operating expenses: N5.708 billion +12.01% YoY
- Profit from continuing operations before tax changes in fair value: N5.665 billion +23.45% YoY
- Exchange gain: N3.502 billion
- Exchange loss: N2.702 billion
- Profit after tax: N5.115 billion -15.06% YoY
- Earnings per share: N5.36 -15.06% YoY
Commentary
Overall, the company’s performance in Q2 2024 lags behind Q1 2024 across key performance indicators:
- Revenue, profits, margins, and earnings per share in Q2 declined compared to Q1 2024. This signifies that the company experienced a weaker financial performance in the second quarter, with lower sales, reduced profitability, narrower profit margins, and decreased returns for shareholders compared to the first quarter.
- Nevertheless, its strong revenue and profit margins still offer comfort and optimism. Despite its high cost of sales, the company managed to retain 36% of its revenue as gross profit and 16.2% as net profit, which offers comfort and optimism.
- This indicates that even though production and sales costs increased significantly, the company maintained a substantial portion of its revenue as gross profit after accounting for these costs.
- For investors, a healthy gross profit margin of 36%, despite a significant increase in the cost of sales, is an encouraging sign. It suggests that Okomu Oil Palm Plc has strong market demand, pricing power, or effective cost management strategies in place.
Another trend worthy of mention is foreign exchange. The company’s recording of both an exchange loss of N2.702 billion and an exchange gain of N3.502 billion in contrast to the previous period, suggests that it experienced fluctuations in foreign exchange rates during the period under consideration.
- Sharp fluctuations in exchange gains and losses, especially when diverging from past trends, can significantly impact a company’s financial statements, affecting reported profits, shareholder equity, and investor sentiment. Therefore, management must address these fluctuations during earnings calls, providing insights into the company’s outlook
Okomu Oil Palm Plc is a leading company in the Agric/Crop Production sector, known for its consistent track record of delivering returns to shareholders through dividends and share price appreciation.
Over the past five years, Okomu has consistently paid dividends. Last year, it distributed a dividend per share of N18.50, which currently offers a dividend yield of 6.34%.
In H1 2023, the company paid an interim dividend of N4.50 per share from a profit after tax of N16.199 billion. For H1 2024, it has reported a post-tax profit of N20.196 billion, indicating a strong potential for paying an interim dividend for the half-year 2024.
The share price has rebounded from its Q1 2024 YtD decline of 24.85%, achieving a YtD gain of 12.31% as of the close of trading on Friday, July 26, 2024.
