Okomu Oil Palm Plc reported a 12.03% decline in pre-tax profit for the first half of 2026 as weaker domestic and export sales, higher production costs, and increased operating expenses weighed on profitability, even as the company strengthened its balance sheet with higher cash reserves and a return to a positive working capital position.
According to the company’s unaudited financial statements filed with the Nigerian Exchange (NGX) on Tuesday, pre-tax profit fell to N58.99 billion for the six months ended June 30, 2026, from N67.05 billion in the corresponding period of 2025.
Profit after tax declined even more sharply, dropping 16.42% year-on-year to N39.73 billion, while earnings per share fell to N41.65 from N49.83 a year earlier.
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The weaker half-year performance reflects slower revenue growth alongside mounting production and operating costs, squeezing margins despite the company’s continued strong profitability.
Quarterly Performance Weakens
The slowdown became more evident during the second quarter. Pre-tax profit fell to N24.89 billion, representing a 27.00% decline from the derived first-quarter profit of N34.10 billion and a 28.58% drop from N34.85 billion recorded in the second quarter of 2025.
Second-quarter revenue also weakened, falling 7.52% year-on-year to N66.33 billion from N71.72 billion, suggesting softer demand and pricing pressures during the period.
Half-year revenue declined 3.50% to N125.29 billion from N129.83 billion in the same period last year.
Domestic sales remained the company’s largest revenue source, accounting for 90.37% of total turnover. However, local sales declined 3.19% to N113.22 billion, highlighting weaker demand in the domestic market.
Export revenue also fell 6.38% to N12.06 billion, contributing 9.63% of total revenue.
The quarterly breakdown showed a mixed picture.
While local sales declined 11.73% to N58.43 billion during the second quarter, export sales surged 42.98% to N7.90 billion, partially offsetting the weakness in the domestic market.
The improvement in exports suggests stronger international demand or higher shipment volumes toward the end of the reporting period, though it was insufficient to compensate for softer local sales.
Rising Costs Compress Margins
Profitability came under additional pressure from higher production costs. Despite lower revenue, cost of sales increased 3.84% year-on-year to N44.56 billion.
Oil palm production costs rose 1.66% to N37.61 billion, while rubber production costs climbed 17.51% to N6.95 billion, reflecting persistent inflationary pressures and higher operating expenses across the agricultural sector.
As a result, gross profit declined 7.13% to N80.73 billion from N86.93 billion.
Gross profit margin also narrowed to 64.44%, compared with 66.95% in the corresponding period of 2025, indicating that the company generated less profit from each naira of revenue.
Operating expenses added to the earnings pressure.
Net operating expenses increased 12.23% to N20.79 billion, leading operating profit to decline 12.37% to N59.94 billion from N68.40 billion.
Exchange Loss Lifts Finance Costs
Finance costs rose 8.85% to N1.57 billion, largely due to an exchange loss of N1.18 billion.
However, the impact was partly offset by stronger finance income. Interest income from fixed deposits and other cash balances increased significantly, with finance income rising to N622.47 million from N97.87 million in the first half of 2025, reflecting improved returns on the company’s growing cash holdings.
After accounting for finance costs and taxation of N19.26 billion, profit after tax settled at N39.73 billion.
Balance Sheet Strengthens
Despite weaker earnings, Okomu Oil’s financial position improved during the period.
Total assets increased 20.06% to N166.71 billion as of June 30, 2026, from N138.85 billion at the end of December 2025.
Cash and cash equivalents rose 65.34% to N21.40 billion, strengthening the company’s liquidity position.
Inventories nearly doubled to N36.61 billion from N18.32 billion, while trade receivables increased to N7.19 billion.
One of the most notable improvements was in working capital.
The company moved from a net current liability position of N2.49 billion at the end of 2025 to a net current asset position of N19.09 billion by the end of June, reflecting stronger short-term liquidity.
Meanwhile, long-term borrowings declined to N3.91 billion, although lease liabilities remained relatively high at N18.28 billion.
Market Performance
Despite the softer earnings, investors have continued to reward the stock this year.
Shares of Okomu Oil closed at N1,418.00 on Tuesday, July 28, 2026, compared with N1,095.00 at the beginning of the year, representing a 29.5% year-to-date gain.
The share price performance suggests investors remain optimistic about the company’s long-term fundamentals, supported by its strong cash generation, improving liquidity and dominant position in Nigeria’s palm oil industry. The optimism appears to overwhelm near-term profitability, which faces pressure from weaker sales, rising production costs and foreign exchange-related expenses.