Economy

Okomu Oil: Great Finish to Epic Year

Published

9 years ago

20/04/2017

By ARM Securities

Over FY 16, The Okomu Oil Palm Company Plc (Okomu) reported a nearly two-fold YoY jump in earnings buoyed by an upsurge in commodity prices (CPO and rubber) and the company’s focus on containing cost.

In view of the buoyant operating performance, the company raised its dividend per share to N1.50 (FY 15: N0.10) yet still had sufficient capital to pursue its expansion plans.

Going forward, the still favourable price regime as well as management’s cost containment efforts leave scope for sustained earnings growth over 2017.

Okomu reported its fastest pace of revenue growth in five years as favourable pricing environment drove sales at the Crude Palm Oil (CPO) segment to record high even as rubber turnover recovered from the 2015 trough despite weaker volumes (-8% YoY to 7,140MT).

Pertinently, the robust CPO sales in the review period was buoyed by higher domestic CPO prices—which reflected combined impact of naira depreciation and bullish global CPO prices (+13% YoY) that deterred imports (29% of total supply).

At the other end, cartel like cuts by major rubber producers bolstered impact of weaker currency on rubber sales, which are entirely exported.

Management linked the decline in rubber volume to the combined impact of wind damage and fire outbreaks on some portion of the company’s rubber plantation which forced some rejuvenation exercises on a section of the company’s rubber farmland.

Given the price induced revenue growth, Okomu reported a moderate rise in input (+5% YoY) and operating (+22% YoY) costs despite rising energy expenses.

According to Management, the benign cost is a fall-out of deliberate increase in import substitution—with imported raw materials now reduced to about 10% of COGS—and tight control on labour costs (65% of overall cost).

Particularly, over the period, the company reduced its full-time employees by 5% to 534 with the knock-down effect applying downward pressure on salaries and wages (-4.4% YoY to N2.4 billion). Consequently, operating margin rose to a record high of 48% (operating profit: +112% YoY). Further down, despite FX loss of N1.0 billion1 which underpinned a nearly three-fold YoY jump in net finance cost, strong operating performance ensured a nearly two-fold YoY jump in earnings to a record high of N4.9 billion.

Over 2017, we expect revenue growth to be tempered by recent retracement in domestic CPO prices from January 2017 peak of N732/kg2 which management linked to the sharp appreciation of the naira (incentivising cheaper imports), declining demand, and onset of the harvest season.

Nonetheless, reflecting the lower base in 2016, we project mean CPO prices to be 38% higher YoY at N423/kg.

The foregoing combined with higher volume (+7% YoY to 38,853MT), informs our forecasted CPO sales to N16.7 billion (+37% YoY). With regards to rubber, management’s guidance of sustained rejuvenation exercise over the financial year underpins our flat volume projection of 7,140MT.

However, reflecting recovery in global rubber prices (Q1 17: +94% YoY, 2017E: +44% YoY), we project a 44% YoY jump in rubber sales to N3.2 billion which brings overall turnover to N19.8 billion (+38% YoY), sustaining its double-digit growth for the third consecutive year, albeit at a slower pace.

On costs, as with 2016, we expect both input and operating cost to rise modestly, given the largely price induced growth in top-line.

In addition, management intends to increasingly substitute its biggest remaining raw material import (fertiliser) with domestic alternatives if available, or cheaper imports. Furthermore, the company intends to connect to the national grid over the year, which could reduce power cost by as much as 60%.

Given that significant progress on this front is not expected until towards the end of the year, we believe the company’s expanded plantation of 21,798 hectares3 should drive a 10% and 21% YoY rise in COGS and OPEX respectively.

Given the company’s sizable external debt of N1.2 billion (43% of total borrowings), we expect vagaries in the FX rate, which we forecast at N360/$ at the year end to induce a N300 million FX loss (-72% YoY) with the reverberating effect expected to drive net finance cost 57% lower YoY to N451 million. Bringing it altogether, we project FY 17 earnings to climb 80% YoY to N8.8 billion.

Largely reflecting strong earnings growth thus far, Okomu has rallied 30.7% YTD, as with peer Presco (+17.2% YTD) outperforming the broader NSEASI (-6.2% YTD).

The stock trades at current P/E of 10.20x (forward: 5.6x) vs. 11.61x (forward: 8.46x) for Bloomberg Middle East & Africa peers with last trading price of N52.51 at a discount to our FVE of N63.10.

We maintain our BUY rating on the stock.

Source: www.armsecurities.com.ng.

Economy

Naira Crashes to N1,420/$1 at Official FX Market

Published

8 minutes ago

15/01/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira crashed against the United States Dollar on Wednesday, January 14 by 38 Kobo or 0.03 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEM) to N1,420.04/$1, in contrast to the N1,419.66/$1 it was traded a day earlier.

Despite the decline in the daily value of the Naira against the greenback in the official FX market, the near-term projection indicate that with continued support by the Central Bank of Nigeria (CBN), stronger external inflows from foreign portfolio investors (FPIs), and improving current account dynamics, the local currency will remain within projected range.

The country’s external reserves continued to swell as it added $40.26 million to the previous day’s balance, bringing total reserves to $45.78 billion.

Data showed that the domestic currency firmed up against the Pound Sterling in the spot market by N2.89 to trade at N1,911.09/£1 versus Tuesday’s closing rate of N1,913.98/£1 and gained N1.11 against the Euro to finish at N1,655.48/€1 compared with the previous day’s value of N1,656.59/€1.

At the GTBank forex desk, the Nigerian currency gained N4 on the US Dollar to sell for N1,427/$1, in contrast to the preceding session’s N1,431/$1 but closed flat at the black market at N1,490/$1.

A look at the cryptocurrency market showed that most of the tracked tokens were under pressure as broader financial markets turned cautious of the US-Iran rhetoric, which affect risk assets like crypto.

US President Donald Trump signaled he may delay military action against Iran, easing immediate geopolitical tensions.

With upcoming U.S. economic data unlikely to shift expectations for a Federal Reserve rate cut before midyear, traders are watching whether crypto can hold positive positions despite softer equity markets.

During the trading day, Litecoin (LTC) declined by 4.9 per cent to $74.70, Cardano (ADA) slumped by 4.3 per cent to $0.4024, Dogecoin (DOGE) went down by 2.6 per cent to $0.1433, Ripple (XRP) slipped by 2.0 per cent to $2.09, Ethereum (ETH) shrank by 0.13 per cent to $3,319.40, and Binance Coin (BNB) depreciated by 0.05 per cent to $936.13.

On the gainers’ angle, Bitcoin (BTC) led with an appreciation of 2.9 per cent to sell at $96,474.70, and Solana (SOL) grew by 0.3 per cent to $144.49, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.

Economy

Energy Stocks, Others Buoy Customs Street by 0.56%

Published

24 minutes ago

15/01/2026

Dipo Olowookere

By Dipo Olowookere

It was another trading session in the green territory for Customs Street on Wednesday as it closed higher by 0.56 per cent as investors doubled down on their confidence in the market.

The Nigerian Exchange (NGX) Limited rallied despite the consumer goods sector going down by 0.20 per cent due to profit-taking by traders.

According to data, the 6.26 per cent gain recorded by the energy space and the others contributed to the growth achieved by bourse at midweek.

Business Post reports that the commodity index was up by 3.35 per cent, the insurance counter expanded by 0.78 per cent, the banking index grew by 0.05 per cent, and the industrial goods sector advanced by 0.01 per cent.

As a result, the All-Share Index (ASI) of the platform was swollen by 934.63 points to 166,771.95 points from 165,837.32 points as the market capitalisation inflated by N599 billion to N106.781 trillion from N106.182 trillion.

During the session, there were 47 price gainers and 28 price losers, implying a positive market breadth index and bullish investor sentiment.

Academy Press gained 10.00 per cent to close at N8.25, NCR Nigeria improved by 9.98 per cent to N106.30, Tripple G surged by 9.95 per cent to N4.86, Tantalizers rose by 9.93 per cent to N2.99, and McNichols leapt by 9.92 per cent to N7.31.

On the flip side, May and Baker lost 9.79 per cent to trade at N28.55, Coronation Insurance shed 6.76 per cent to settle at N3.31, Livestock Feeds declined by 6.67 per cent to N7.00, PZ Cussons moderated by 6.52 per cent to N54.50, and Eterna gave up 6.30 per cent to quote at N34.20.

It was a quiet market day on Wednesday as the level of activity dropped, as Access Holdings, which led the chart by volume, only transacted 53.4 million shares valued at N1.2 billion, Lasaco Assurance traded 39.0 million stocks worth N100.2 million, Veritas Kapital sold 32.8 million equities for N69.6 million, Tantalizers exchanged 30.1 million shares worth N89.6 million, and Deap Capital traded 28.6 million stocks valued at N114.1 million.

At the close of business, a total of 761.9 million equities worth N29.9 billion exchanged hands in 55,751 deals compared with the 1.1 billion equities valued at N33.6 billion transacted in 49,216 deals on Tuesday, indicating a shortfall in the trading volume and value by 30.74 per cent and 11.01 per cent apiece, and a leap in the number of deals by 13.28 per cent.

Economy

Oil Falls as Trump Cools Possible Attack on Iran

Published

46 minutes ago

15/01/2026

Adedapo Adesanya

By Adedapo Adesanya

Oil traded lower on Wednesday after US President Donald Trump eased fears of disruptions to Iranian supplies, indicating that killings in Iran’s crackdown on civil unrest were subsiding.

Yesterday, the price of Brent futures declined by 92 cents or 1.41 per cent to $64.55 per barrel while the US West Texas Intermediate (WTI) futures slipped 96 or 1.57 per cent to $60.19 a barrel.

Prices had risen on fears of Iranian supply disruptions due to a potential US attack on Iran and possible retaliation against US regional interests.

President Trump said on Wednesday afternoon he had been told that killings in Iran’s crackdown on nationwide protests were subsiding and he believed there was currently no plan for large-scale executions.

Still, tensions between Iran and the US remained high after Iran had warned US allies in the Middle East it would strike American bases on their soil if the US attacked it. The US began evacuating military personnel from a key Qatar air base on Wednesday.

While markets may have cooled somewhat on the back of President Trump’s comments, protests in Iran have persisted, and there remains plenty of uncertainty over what might come next.

Market analysts noted that continued protests in Iran risk tightening global oil balances through near-term supply losses, but mainly through rising geopolitical risk premium.

However, this remains somewhat minimal as the protests had not spread to the main Iranian oil-producing areas, which had limited the effect on actual supply.

Also supporting oil prices, Federal Reserve Bank of Minneapolis President Neel Kashkari said on Wednesday he was optimistic about the economic outlook and expected inflation to ease.

It is also looking increasingly likely that Venezuela’s oil supply is set to return to markets, with the US completing its first sale of Venezuelan oil on Wednesday.

Two supertankers departed Venezuelan waters on Monday with about 1.8 million barrels each of crude in what may be the first shipments of a 50 million-barrel supply deal between Venezuela and the US to get exports moving again following the capture of Venezuelan President Nicolas Maduro.

Crude oil inventories in the US increased by 3.4 million barrels during the week ending January 14, according to new data from the US Energy Information Administration (EIA) released on Wednesday.

The EIA’s data release follows figures by the American Petroleum Institute (API) that were released a day earlier, which suggested that crude oil inventories grew by 5.27 million barrels.