Okomu Oil Palm Plc rebounded in the third quarter of 2023, posting a 16 per cent increase in profit to slightly under N21 billion, reversing the 4 per cent decline to N16.2 billion reported at the end of the second quarter.
Business a.m gathered that the turnaround was driven by a surge in revenue, which rose by 33 per cent to N26 billion at the end of the third quarter, reversing the 6 per cent drop to N19.7 billion in the second quarter. The strong performance in the third quarter was a welcome turnaround for the oil palm-producing company, which had struggled with declining revenue and profit in the prior two quarters.
Okomu Oil’s third-quarter financial results show that its robust revenue growth was supported by a decline in costs, reversing the pattern seen in the second quarter when costs increased even as revenue declined. This helped to boost the company’s operating margin, which jumped to over 77 per cent in the third quarter, compared to just over 43 per cent in the second quarter. As a result, operating profit rose by 112.8 per cent to N20 billion, compared to just N9.4 billion in the prior quarter.
Meanwhile,production costs increased by 66 per cent to N7.9 billion, lagging far behind the 112.8 per cent growth in sales, which resulted in a 159.4 per cent increase in gross profit to over N12 billion. This is a significant turnaround from the previous quarter, when production costs rose by 21 per cent and gross profit fell by 28 per cent to N9.7 billion.
In addition to the cost savings, Okomu Oil’s operating expenses also grew at a slower rate than sales, rising by 52.8 per cent to N5 billion in the third quarter. As a result, the company’s operating profit jumped more than five-fold to N7 billion, a stark contrast to the 54 per cent decline in operating profit in the previous quarter.
Despite the high growth in net finance costs, Okomu Oil Palm was still able to increase its pre-tax profit by more than five times year-on-year to N6 billion in the third quarter. This is due to the significant increase in operating profit and the company’s ability to control expenses. After accounting for income taxes, the company’s net profit for the third quarter increased by almost four times year-on-year to N4.7 billion.
Okomu Oil reported an earnings per share (EPS) of N21.93 at the end of the third quarter, compared to N18.92 in the same period last year. This represents a healthy increase in EPS, driven by the improvement in net profit.
According to the company’s forecast, it is expected to record an after-tax profit of N2.3 billion in the fourth quarter, based on sales revenue of N13.5 billion. This suggests that the company is expecting to end the year on a strong note, despite the challenges it has faced so far.