Okomu posts 28% y/y dip in gross profit in Q2’23

Okomu Oil Palm, a leading palm oil producer in Nigeria, has recently reported a 28% year-on-year dip in its gross profit for the second quarter of the year, amounting to 13.48 billion naira. The decline in revenue can be attributed to multiple factors, including a drop in prices, higher finance costs, and the impact of illegal oil imports from countries like Malaysia and Indonesia. Graham Hefer, the Managing Director at Okomu Oil Palm, shed light on the challenges facing the company in a recent interview with CNBC Africa. He highlighted the adverse effects of the current economic landscape in Nigeria, which includes rising fuel prices, the removal of fuel subsidies, inflation, and devaluation. These factors have collectively contributed to the decrease in revenue for the company. One of the primary concerns for Okomu Oil Palm is the issue of illegal oil imports, particularly the influx of Olean from overseas markets. This not only disrupts the market but also hampers the company's operations and relationships with customers. However, Hefer expressed optimism about the situation, stating that discussions with relevant agencies have led to some positive developments, and he expects a reduction in illegal imports in the coming quarters. The company is also grappling with challenges in its rubber segment, where prices have dropped due to factors such as a slowdown in the Chinese market. Inflation rates and currency devaluation further compound the situation, leading to a margin squeeze for Okomu Oil Palm. Despite these hurdles, the company is leveraging foreign exchange gains to mitigate some of the impacts of currency devaluation. Looking ahead, Hefer remains cautiously optimistic about the future outlook, noting that commodity prices are showing signs of improvement towards the end of the year. However, he emphasized the need to address inflationary pressures and limited disposable income in the market to avoid further margin squeezes. As Okomu Oil Palm navigates the challenging operating environment, the company plans to focus on consolidating its current operations and monitoring market developments before considering further expansion. The board is keen on achieving profitability in its Extension 2 project before exploring new growth opportunities. Additionally, sustainability is a key consideration as the company aims to balance production and processing with climate change concerns. Despite the current challenges, Okomu Oil Palm remains resilient and looks forward to greener days ahead with strategic planning and a focus on long-term growth.