Okomu Oil Palm Plc regained operating momentum in the third quarter after losing revenue and profit in its critical second quarter.
The upturn enabled the oil palm-producing company to raise profit by about 16 percent to slightly below N21 billion at the end of the third quarter, pushing up from a profit drop of about 4 percent to N16.2 billion at the half year.
The company’s third-quarter interim financial report for the nine months ended September 2023 shows that the strength in the quarter came from a rebound in sales revenue from a drop of 19 percent in the second quarter to a marked growth of 112.8 percent to over N20 billion for the third quarter.
The strong revenue growth was followed by a general slowdown in costs quite unlike in the second quarter when costs grew against the drop in sales.
Production cost grew at a much slower pace than sales at 66 percent to N7.9 billion for the quarter, which powered a record growth of 159.4 percent in gross profit to over N12 billion. This is a major upswing from a drop of 28 percent in gross profit to N9.7 billion in the second quarter.
Net operating expenses for the quarter also slowed down relative to sales at an increase of 52.8 percent to over N5 billion. With the cost savings, operating profit multiplied more than 5 times in the quarter to over N7 billion, reversing a drop of over 54 percent in operating profit in the second quarter.
Net finance cost maintained the strong growth seen in the second quarter and grew from less than N178 million in the same quarter last year to about 778 million in the third quarter.
Despite the high growth in finance cost, the company still multiplied pre-tax profit more than five times year-on-year to over N6 billion for the third quarter while after-tax profit jumped close to four times to N4.7 billion for the third quarter.
The company’s nine-month earnings story has improved considerably with the upturn achieved in the third quarter. Sales revenue has improved by almost 21 percent to N60.6 billion at the end of the third quarter, reversing from a slight decline at the half year.
Production cost has however maintained its revenue-consuming trend of growing ahead of sales at 31.6 per cent to almost N19 billion at the end of the third quarter.
Input cost keeps expanding its claim on sales from 18 percent in the first quarter to over 27 percent at half year and further to over 31 percent at the end of the third quarter.
Improving sales with encroaching production costs permitted an increase of 16.5 percent in gross profit to N41.7 billion at the end of September 2023. This is an improvement from a decline of about 5 per cent in gross profit at the half year.
Net operating expenses accelerated from an increase of 33 percent at the half-year to 39.4 percent at the end of the third quarter, which pressured margins further.
Operating profit improved by less than 7 percent to N26.8 billion at the end of nine months of trading, better than the drop of about 17 percent at half year.
Net finance cost continued its massive increase from less than N482 million in the same period last year to roughly N2 billion at the end of the third quarter.
A profit drop was averted by the appearance of exceptional income of N4.4 billion that flowed in during the second quarter. The inflow enabled an increase of 18.7 percent in pre-tax profit to over N29 billion at the end of the third quarter. This is a reversed movement from a moderate decline of 2 percent in pre-tax profit at the half year.
After-tax profit also has recovered from a decline of 3.8 percent at half year to an increase of 15.9 percent to close at N20.9 billion in September 2023. Profit margin remained down from 49 per cent in the same period last year and from 39.9 per cent at half year to 34.5 per cent at the end of the third quarter.
By the company’s forecast, an after-tax profit of N2.3 billion is to be expected in the final quarter when sales revenue of N13.5 billion is also to be expected.
Okomu Oil Palm earned N21.93 per share at the end of the third quarter of operations, up from N18.92 per share in the same period in 2022.