Okomu Oil Q3 2017 reports PAT decline by 73% y/y

Okomu Oil Plc third quarter result for the period ended 30th September, 2017, has shown growth in net finance cost growing from –N102 million to N65m.
The result showed that sales and PBT grew by 22 per cent y/y and 14 per cent y/y to N4.1bn and N1.4billion, respectively. However, PAT declined by -73 per cent y/y due to a 3,672bp y/y expansion in tax rate.

According to the report, , irrespective of a net interest income of N65m , against , PBT growth was slower than the sales growth because of a -1,093bp y/y contraction in gross margin and an 11 per cent y/y rise in operating expense.
On a sequential basis, sales declined by -38 per cent q/q.

The end-Sep quarter is usually one of the weaker quarters for the palm oil companies. Despite the positive net interest expense figure and a 20% q/q decline in operating expenses, these were not strong enough to offset the sales decline and a -2,863bp q/q contraction in gross margin, leading to PBT declining by -69% q/q.
PAT declined by a wider margin of -95% q/q due to a higher tax rate of 88%, compared with 28% recorded in the preceding quarter. FBNQuest estimate, “sales and PBT were behind by 18% and 30% respectively while PAT missed by a wider margin.

Analyzing the result on nine months basis, showed that sales of N16.6bn grew by 52% y/y. PBT and PAT grew by 80% y/y and 53% y/y to N9.2bn and N6.4bn, respectively.
Although gross margin contracted by -342bps y/y and operating expenses grew by 13 per cent y/y, these were not strong enough to offset the strong sales growth and a -76% y/y decline in net finance costs, leading to the relatively stronger PBT growth.

The revenue figure shows that palm oil sales of N3.2bn grew by 17% y/y while rubber sales advanced by 42% y/y to N929m. The rubber business now represents 23% of Okomu’s topline compared with 40% in 2011.

On an annualized basis, Okomu’s sales and PBT are broadly on track to meeting consensus’ FY estimates of N20.8bn and N11.3bn respectively, but PAT is tracking behind by 13%.

Adesola Afolabi