Declining Sales, Profit May Persist for Okomu Oil Palm in H2

Okomu Oil Palm Plc is likely to see continued declines in sales and profit in the second half of 2026, as recent financial results highlight persistent challenges.

Domestic sales, the company’s primary revenue source, fell nearly 12 per cent year-on-year to N58.4 billion in Q2, reversing earlier gains in Q1.

The company’s interim financial report for the half year ended June 2026 shows a significant loss of domestic sales in the second quarter that could not be remedied by gains from export revenue.

Although export sales of natural rubber rebounded by 43 per cent in Q2 to almost N8 billion, half-year export earnings still fell short compared to 2025.

Rubber cup lumps from the company’s rubber plantations constitute its export sales.

At N12 billion in the half-year, export sales of natural rubber products crashed from about N13 billion in the same period in 2025. The company’s off-season effect usually shows bigger sales revenue from both domestic and export markets in the first half than in the second.

In the first half of last year, 66 per cent of the N173 billion annual domestic sales and over half of the yearly export sales were generated.

In all, the company earned over N198 billion in the first half of 2025, accounting for approximately 66 per cent of its projected full-year turnover.

Off-season periods significantly impact profits, as costs remain high while sales revenue drops. In the latter half of last year, only N10.4 billion, less than 18 per cent, of the N58 billion full-year after-tax profit, was generated.

Against the drop in sales revenue at half-year are cost increases that extended the impact of the loss of sales on profit delivery.

While turnover declined by N4.6 billion, representing 3.5 per cent year-on-year at the end of half-year operations, cost of sales increased by N1.7 billion or roughly 4 per cent to N44.6 billion over the same period.

The cost-income imbalance resulted in a drop of over N6 billion, or 7 per cent, in gross profit to N80.7 billion for the half-year.

Net operating expenses rose 12 per cent to N20.8 billion, extending the fall in operating profit to 12.4 per cent to close at under N60 billion.

The only cost saving came from a drop in net finance expenses, reflecting strong growth in finance income. Net finance expenses went down by 29.5 per cent to N949 million at half-year.

Okomu Oil Palm pre-tax profit still dropped 12 per cent year-on-year to slightly below N59 billion at half-year, while profit for the period closed 16.4 per cent lower to N39.7 billion.

The cost-to-income pressure facing the company increased in the second quarter – which contributed more to costs than to earnings. While about 53 per cent of the half-year turnover came from the second quarter, as much as 73.8 per cent of cost of sales was incurred during the quarter.

Consequently, the second quarter’s contributions to earnings from gross profit to the bottom line are close to 40 per cent. Contributions in the remaining quarters to earnings are expected to decline further due to the off-season effect.

Okomu Oil ended the half-year operations with earnings per share of N41.65, dropping from N49.83 per share, a record for the same period last year.