Friday, July 27, 2017 /11:15AM / FBNQuest Capital
Event: Okomu Oil reports Q2 2018 results
Implications: On an annualised basis, Okomu’s H1 2018 sales and PBT of N12.9bn and N7.0bn are tracking ahead of consensus estimates of N23.0bn and N12.4bn respectively. However, we expect a negative reaction by the market on the back of the relative weaker y/y performance. The market’s reaction could possibly be intensified because Okomu shares, which have gained 22.6% year-to-date have significantly outperformed the index. Additionally, H1 2018 figures came in behind our estimates.
Positives: Operating expenses declined by -26% y/y to –N1.5bn.
Negatives: Sales declined in Q2 2018 for the first time in eight consecutive quarters of growth. The topline decline was primarily driven by relatively lower oil palm sales which were down -15% y/ to N6.1bn. Rubber sales also fell by -9% y/y to N461m. This provides some evidence to our view of increasing imported competition. For now, these results suggest a less bullish outlook for the rest of the year given that H1 is seasonally stronger. Gross margin contracted significantly, by –c.2000bp y/y, to 79.6%; that said, gross margins have been volatile on a quarterly basis, historically.
We rate the stock Neutral. Our estimates are under review.
Okomu Oil’s Q2 2018 results: actual vs. FBNQuest Capital Research estimates (N millions)
11. Corporate Earnings for the Week Ending 040817 – OKOMUOIL Declares N6.24 bln PAT in Q2 2017 Results