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

Four Securities Erase N51.17bn from NASD Exchange

Published

1 day ago

27/06/2026

Adedapo Adesanya

By Adedapo Adesanya

Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.

In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.

The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.

During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.

Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.

GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.

Economy

Cautious Trading, Profit-taking Weaken Nigeria’s Stock Exchange by 0.66%

Published

1 day ago

27/06/2026

Dipo Olowookere

By Dipo Olowookere

The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.

This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.

Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.

At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.

Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.

The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.

As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.

Economy

Official FX Market Sees Naira Dip to N1,380.93/$1

Published

1 day ago

27/06/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.

Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.

At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.

Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.

Also, a stronger greenback has generally put significant pressure on emerging-market currencies.

Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).

The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.

If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.

At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.

On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.