Event: Okomu Oil reports Q4 2017 results
Implications: Modest revisions to consensus estimates likely
Positives: PBT and PAT up 147% y/y and 222% y/y respectively
This morning, Okomu Oil (Okomu) reported its Q4 2017 results which showed that sales grew by 7% y/y to N3.7bn. PBT and PAT advanced by 147% y/y and 222% y/y to N2.0bn and 2.5bn respectively. The strong bottom line was driven by a 2,000bp y/y gross margin expansion and a net interest income of N61m versus a net charge of –N882m in the corresponding quarter of 2016. Opex of N180m (vs. +N379m in Q4 2016) was not large enough to offset the positives. Further down the P&L, a tax rebate of N786m (vs. a charge of –N63m in Q4 2016) led to PAT before OCI growing faster than PBT, by 275% y/y. PAT after OCI grew by 222% y/y due to an OCI figure of -N222m versus +N52m in Q4 2016. On a sequential basis, sales declined by -11% q/q. We attribute the sales decline to seasonality. The end-Dec quarter is usually one of the weakest quarters for the palm oil companies. Despite the q/q sales decline and a -1,858bp q/q gross margin contraction, these were not strong enough to offset an -89% q/q decline in operating expenses. As such, PBT advanced by 45% q/q. PAT before OCI grew by 1633% q/q due to the tax rebate. Compared with our estimates, Q4 sales were behind by 18% while PBT was ahead by 54%.
On a FY basis, sales of N20.3bn grew by 41% y/y. PBT and PAT after OCI grew by 89% y/y and 80% y/y to N11.1bn and N8.9bn respectively. Although operating expenses grew by 29% y/y, this was not enough to offset the strong sales growth, a 413bp y/y gross margin expansion to 79% and a net interest income of N7m (versus a net interest charge of –N1.0bn in FY 2016). Compared with our estimates, sales were behind by 4% while PBT was ahead by 7%.
A breakdown of the revenue figure shows that palm oil sales of N2.7bn were flat y/y while rubber sales advanced by 28% y/y to N985m. The rubber business now represents 27% of Okomu’s topline compared with 40% in 2011. We believe the revenue growth for rubber seen during the last four quarters was driven more by pricing than volume growth.
Compared with consensus, Okomu’s FY 2017 sales were in line while PBT was ahead by 5%.
Year to date, Okomu shares have gained 6.4% vs the NSE ASI which has returned 7.8% this year. We rate the stock Neutral. Our estimates are under review.
Okomu Oil’s Q4 2017 results: actual vs. FBNQuest Capital Research estimates (N millions)