Okomu Oil, Presco Report a 94% Increase in Profits in Q1 2024 Despite Rising Inflation

Amidst economic fluctuations, the total earnings of two prominent agricultural companies listed on the stock exchange, Presco Plc and Okomu Oil Palm Company Plc, increased by 94.32% in the first quarter of 2024.

The devaluation of the Naira and inflationary pressures are blamed for the increase in earnings, as the prices of agricultural products throughout the nation have skyrocketed.

The companies’ most recent financial filings, show that their after-tax earnings increased from N20.139 billion in the equivalent period of 2023 to N39.135 billion in the first quarter of 2024.

The top producers of palm oil made N80.027 billion in income, up from N46.122 billion in 2023.

Subsequent investigation showed that Presco only reported N43.482 billion in revenue from local sales during the period under review, whereas Okomu recorded N39.299 billion from the local market (Nigeria) and N4.183 billion from export sales.

While Okomu Oil reported 115.91% growth in sales revenue to N43.482 billion in 2024 from N24.207 billion in Q1’2023, Presco registered a 94.13% increase in sales revenue to N42.545 billion from N21.915 billion in 2023.

Food inflation has intensified the spiraling prices of food goods due to the depreciation of the Naira and other macroeconomic inflationary pressures, particularly in the domestic market.

Food Price Inflation

Nigeria’s food inflation rate increased significantly from 24.82% in May 2023 to 40.66% in May 2024 on an annual basis. Furthermore, it surpasses the 40.53% recorded in April 2024.

Many variables impacting different food categories have been blamed for this dramatic increase in food prices.

The products under the categories of Bread and Cereals, Potatoes, Yam, Water Yam, etc., Stockfish, Mudfish, Crayfish, etc., Fish Class, Beef Head, Chicken-live, Pork Head, Bush Meat, etc., are the ones that are most responsible for this inflation. Other items that fall under the category of Oil and Fat are Semovita, Oatflake, Yam flour pre-packaged, Garri, Bean, etc.

In May 2024, food inflation was recorded at 2.28% on a month-over-month basis, which is lower than the 2.50% recorded in April 2024.

An analysis of the performances

A brief examination of the financials revealed that Presco Plc’s earnings after taxes increased from N9.962 billion in 2023 to N24.07 billion in 2024, a 141.47% increase.

In 2024, revenue sales increased from N21.915 billion to N42.545 billion, a 94.13% increase. The cost of sales increased by 53.54% to N8.747 billion from the N5.697 billion recorded in 2023.

Twenty-five percent of the company’s revenue was consumed by the cost of sales.

On Wednesday, June 19, 2024, Presco’s trading came to an end at N359.00 per share, indicating a 4.1% increase over its previous closing price of N345.00.

Okomu Oil Plc increased its earnings after taxes from N10.177 billion in Q1 2023 to N15.080 billion in Q1 2024, a 48.18% increase.

From N24.207 billion in Q1 2023 to N43.482 billion in 2024, sales revenue increased by 115.91%.

But from N4.391 billion in 2023 to N10.324 billion in 2024, the cost of sales increased by 135.12%. 23.74% of the total revenue is made up of the cost of sales.

Okomu saw a 3.6% rise over its previous closing price of N255.70 as it concluded the trading day at N265.00 per share.

Things To Note

Over-reliance on oil and gas as primary sources of income has continued to be a significant factor in Nigeria’s incapacity to satisfy the rising demand for palm oil around the world.

Apart from major commercial players in the Nigerian palm oil industry, such as Presco Oil Plc and Okumo Oil Plc, the country’s oil palm business is primarily controlled by smallholders, with a smaller presence of semi-automated and mechanized processors.

About 95% of domestic palm oil production is produced by smallholders and semi-mechanized processors. The drivers play a crucial role in efficient production. Farmers, processors, marketers/consumers, and equipment fabricators are some of these.

The issues with the drivers must be resolved if Nigeria is to raise its percentage of domestic production, decrease imports, and produce palm oil of higher quality.

June 21, 2024