In 2020FY, Okomu Oil Palm Plc. delivered topline growth of 24.08% YoY to NGN23.41bn. This growth was fueled by better Crude Palm Oil (CPO) sales, which expanded by 29.17%YoY (to NGN20.50bn, from NGN15.87bn in 2019FY). CPO sales benefitted from the Federal Government’s border closure directive (which ran from August 2019 – December 2020), which limited smuggling across the country’s porous borders, encouraged domestic patronage and provided local players the leeway to implement price increases as CPO prices were increased by c. 22% (according to company management). In contrast, the company’s rubber business was severely affected by slower demand last year (consistent with the trend observed globally), as well as logistics (port-related) bottlenecks. Oversupply of rubber in the international market, combined with the impact of the coronavirus pandemic, which necessitated the shutdown of tyre factories worldwide, exerted downward pressure on rubber revenue (which the company exports). This brought revenue from rubber sales down by 2.89% year on year to NGN2.91bn (vs. NGN2.94bn recorded in 2019FY). While we expect local CPO demand to remain strong, we are concerned that the reopening of the borders may facilitate increased smuggling of cheap CPO into the country. Hence, we forecast a 12.46% YoY growth in revenue to NGN26.33bn (vs. NGN23.41bn in 2020FY).
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