Okomu oil, a Nigerian oil palm-producing company, saw its finance income soar by “7.185”, driven by exchange gain in an economy where business losses are piling due to naira volatility.
Data from the Nigeria Exchange Group (NGX) disclosed that the company’s finance income grew from ₦113 million in the nine months of 2023 to ₦8.23 billion in the same period of 2024, aided by exchange gain which rose to ₦8.23 billion from ₦109.3 million.
BusinessDay states that this development contrasts the tales of other manufacturing companies that have been posting significant losses following the floating of the naira in June last year and the two-time devaluation of the currency, putting it at its cheapest value on record.
Finance income refers to the revenue a company generates from its financial activities, rather than its core operations. It’s essentially income earned from money-related activities.
A further analysis showed that just as the oil palm company’s exchange gain rose significantly, it also suffered a major exchange loss moving from ₦1.3 billion to ₦8 billion in nine months due to the weak naira and unstable exchange rate that’s eroding its profits.
The exchange loss saw the company’s finance cost increased to ₦8.75 billion from ₦2.08 billion.
However, the oil palm company saw a surge in its profit-after-tax, showing resilience despite the tough business climate as it grew from ₦21 billion in 9 M’23 to ₦28 billion.
Also, the firm grew its revenue by 41.6 percent as turnover for the period under review soared to ₦103.9 billion from ₦60.6 billion it recorded in the corresponding period last year.
Read also: Okomu Oil projects a 68% profit decline amid bandits’ attacks, economic woes.
Okomu oil engages in both local and export sales of its products. Its financials showed the significant rise in its revenue was fuelled by its local sales which rose from ₦55.1 billion to ₦87.9 billion, highlighting a stronghold of the domestic market.
Its export sales also grew to N15.9 billion from a meagre ₦5.4 million in 9’M ‘23, showing a growing international expansion.
However, in the reviewed period, the company’s total cost of sales grew by 57.5 percent, reflecting an increase in the amount of production occasioned by an high inflationary environment and eroding purchasing power.
The total cost of goods produced (oil palm and rubber) increased from ₦18.95 billion to ₦44.63 billion. The financials revealed that the cost incurred in producing oil palm rose from ₦17.3 billion to ₦38 billion, representing a 54.4 percent rise in nine months.
In the same token, the company paid more in the production of its rubber products, rising from a paltry ₦1.6 billion to ₦6.5 billion, representing a huge 75.38 percent growth, suggesting the rise in prices of palm oil and rubber in markets.
During the nine-month fiscal period of 2024, Okomu’s net cash inflow increased by 17.05 percent, moving from ₦25.3 billion to ₦30.5 billion buoyed by receipts from customers grew by 38.36 percent.
Similarly, its net cash outflow from investing activities fell by 48.43 percent up from ₦4.46 billion to ₦2.3 billion due to the acquisition of plant, property and equipment (PPE) which significantly rose from ₦4.1 billion to ₦8.5 billion.
The closing balance of Cash and cash equivalents at the end of the period amounted to ₦5.5 billion, representing a decrease from ₦12.3 billion in the corresponding period of 2023.
Meanwhile, total net assets rose marginally in the reference period to ₦46.2 billion from ₦43.5 billion posted last year.
