One of the recently released results at the Nigerian Stock Exchange (NSE) during the half-year (H1) 2015 earnings season is that of The Okomu Oil Palm plc.
The profit and comprehensive income of Okomu Oil Palm plc for the half year period to June 30, 2015 shows its profit before tax (PBT) rose from HI 2014 period of N1.73billion to N2.13billion in H1 2015, rising by about N400million.
The company reported profit after tax (PAT) of N1.84billion from N1.41billion in H1’14, an increase of about N430million.
Okomu Oil Palm plc recorded H1’15 turnover of N4.99billion from N4.87billion in H1’14, indicating an increase of about N120million.
The company’s finance cost – which is total expenses associated with securing finance for a project or business arrangement by Okomu Oil plc increased by N86.03million to N243.68million from N157.65million.
Earnings Per Share (EPS) which is the portion of its profit allocated to each outstanding share of common stock as well as serves as an indicator of a company’s profitability rose from N1.48 to N1.93.
At the Nigerian bourse, the shares of Okomu Oil stood at N28.95 at the close of trading this week Monday. Following Okomu H1 2015 results release, Olajumoke Okeowo led team of equity research analysts at FBN Capital Limited in their reaction revised their earnings estimates upwards for the 2015-16E period by an average of 2percent, saying that their price target for Okomu moved up by 4 percent to N25.7.
“Although gross margin contracted by -264basis points (bps) year-on-year (y/y) to 85.5 percent and finance charges increased by 47.8percent y/y, these negatives were not strong enough to offset the impact of a 20.7percent y/y decline in operating expenses (opex)” the analysts added.
Okomu Oil Palm plc H1’5 net operating expenses (NOE) declined remarkably by over N500million from H1’14 level of N2.419billion to N1.919billion as at H1’15. The direct costs attributable to the production of the goods sold by Okomu Oil Palm plc rose by N146.41million from N578.40million to N724.81million.
“Although H1 2015 earnings came in 27percent ahead of our estimates, we had to factor in a significantly weaker-than-expected fourth-quarter (Q4) 2014 set of results. In H1, even though palm oil unit volumes grew by 46 percent year-on-year (y/y), sales were dragged down by unfavourable pricing. Thankfully, cost-saving measures proved significant. We do not envisage a price recovery in the near term,” said FBN Capital analysts.
They added: “As such, we have modeled a 5percent y/y increase in 2015E sales. Notwithstanding, we forecast a faster EPS growth of 33percent y/y, as we expect the company to maintain its cost-saving schemes. Regarding the price target drivers, we reduced our terminal growth rate assumption by 100bps to 7percent.”
“Okomu shares are trading on a 2015E P/E of 11.3x for a 16% y/y average EPS growth in 2016-17E. Year-to-date, the shares have gained 7.0% (vs. -12.5% NSEASI). From current levels, we see a slight downward potential of -5.1%. We maintain our Neutral rating,” FBN Capital analysts further said.
About the company
In 1990, the Technical Committee on Privatisation and Commercialisation (TCPC) privatized The Okomu Oil Palm Company on behalf of the Federal Government of Nigeria. It has since grown to become Nigeria’s leading oil palm company with 8,800 ha of mature palm, a young extension of 4,000 ha of rubber, and a palm oil mill of 30 tons per hour capacity.
The privatisation of the Okomu Oil Palm Company Plc has been a great success and a huge encouragement for the Nigerian agricultural sector for the future, with profound positive consequences of stable socio –economical growth for the region where it is implanted. The success of the company was further exemplified by the strong increase of its net income which allowed doubling of its dividend. This company has consistently posted profits in the last 10 years, a period during which most other agricultural initiatives in the country had either folded –up or were performing sub-optimally.
What is most inspiring is not just the growth and profitability of the company but the fact that The Okomu Oil Palm Company Plc is ranked 10th among listed companies with the largest turnovers quoted on the Nigerian Stock Exchange (NSE). Currently, Okomu benefits from the quality management provided by its main shareholders and technical partner (SOCFINAF).
With a 53.32% share in Okomu Oil Palm Plc, SOCFINAF is the biggest single shareholder in the company. SOCFINAF brings into Okomu Oil Palm Plc a little under a century of sound acclaimed technical expertise in the world stage.
SOCFINAF (Luxemburg), is a global player in the cultivation of oil palm, rubber, coffee and tropical flower. SOCFIN S. A. founded in 1912 was the first industrial company to plant oil palm in Africa and Indonesia. It has ongoing plantation operations in Cote D’ivoire, Liberia, Guinea, Cameroon, Kenya and Indonesia.
The Okomu Oil Palm plc was established in 1976 as a Federal Government pilot project aimed at rehabilitating oil palm production in Nigeria. At inception, the pilot project covered a surveyed area of 15,580 hectares out of which 12,500 hectares could be planted with oil palm. It was incorporated on December 3, 1979 as a limited liability company.
Iheanyi Nwachukwu
