TUE 03 AUG, 2021-theGBJournal- OKOMU OIL published its Q2-21 unaudited financials on Friday, July 30, reporting EPS growth of 115.9% y/y to NGN4.47 in Q2-21 (Q2-20: NGN2.07). Accordingly, H1-21 EPS stood at NGN10.00 (+138.1% y/y). The growth in EPS was driven by stellar growth in top-line and a reduction in net finance costs.
Revenue grew by 69.3% y/y in Q2-21 (H1-21: +74.7% y/y), primarily driven by solid growth in sales – local (+65.0% y/y; 90.3% of revenue) and export (+124.6% y/y; 9.7% of revenue).
The growth in revenue can be attributed to increased demand for CPO and rubber amid the reopening of the economy, the surge in CPO price (Average CPO price: USD1,084.00/mt in Q2-21 vs USD1,014.00/mt in Q1-21), and the pandemic induced low base from Q2-20.
However, on a q/q basis, revenue declined by 11.8% to NGN11.07 billion in Q2-21 (Q1-21: NGN12.55 billion), following relatively lower volumes.
Gross margin contracted by 51bps to 86.8% in Q2-21 (Q2-20: 87.3%) due to a faster growth in cost of sales (+76.2% y/y) relative to revenue (+69.3% y/y).
We suspect that higher diesel prices must have resulted in higher energy costs, which constitutes about 60.0% of OKOMUOIL’s total costs.
Management also alluded that the higher crude oil prices influenced an increase in the cost of fertilizers.
EBIT rose markedly by 100.1% y/y to NGN5.18 billion (Q2-20: NGN2.59 billion), as the sturdy increase in revenue (+69.3% y/y) offset the increase in operating expenses (+30.6% y/y). Accordingly, the EBIT margin increased by 721bps to 46.8% (Q2-20: 39.6%).
OKOMU’s bottom-line was further supported by a 52.3% y/y decline in net finance costs, following a 51.5% y/y reduction in finance cost. We highlight that the company’s total debt decreased by 24.2% to NGN357.01 million as of H1-21 (H1-20: NGN470.86 million).
Overall, the company recorded a PBT growth of 107.2% to NGN5.13 billion in Q2-21 (Q2-20: NGN2.48 billion). Following a tax expense of NGN1.21 billion, profit after tax printed NGN3.91 billion (Q2-20: NGN1.98 billion).
OKOMUOIL’s Q2-21 performance was in line with expectations, given the rally in CPO prices and improved demand. Although costs were higher in the period, we expect tempering over 2021FY, with the commissioning of its 5MW turbine in H2-21.
In addition, we highlight that the third wave of the pandemic, depending on the severity, is a strong headwind to the company’s operations.
Nevertheless, we expect the company to see out 2021FY positively, following the stellar performance in H1-21.
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