In an economy where corporate losses are mounting due to naira volatility, Okomu Oil, a Nigerian oil palm producer, had a 7,185 percent increase in their finance income due to exchange gains.
With the help of an exchange gain that increased from N109.3 million to N8.23 billion, the company’s financial income increased from N113 million in the nine months of 2023 to N8.23 billion in the same period of 2024, according to data from the Nigeria Exchange Group (NGX).
This development contrasts the stories of other manufacturing firms reporting large losses since the naira was devalued twice, to its lowest value ever, and floated in June last year.Â
The money a business makes from its financial operations rather than its core business is referred to as finance income. In essence, it is revenue derived from financial endeavors.
A more thorough investigation revealed that, in addition to the oil palm company’s notable exchange gain, it also experienced a huge currency loss, going from N1.3 billion to N8 billion in just nine months as a result of the unpredictable exchange rate and weak naira, which are undermining its earnings.
Due to the currency loss, the company’s finance cost went from N2.08 billion to N8.75 billion.
Nevertheless, the oil palm company’s profit-after-tax increased from N21 billion in 9 M’23 to N28 billion, demonstrating tenacity in a challenging business environment.
The money a business makes from its financial operations rather than its core business is referred to as finance income. In essence, it is revenue derived from financial endeavors.
A more thorough investigation revealed that, in addition to the oil palm company’s notable exchange gain, it also experienced a huge currency loss, going from N1.3 billion to N8 billion in just nine months as a result of the unpredictable exchange rate and weak naira, which are undermining its earnings.
Due to the currency loss, the company’s finance cost went from N2.08 billion to N8.75 billion.
Nevertheless, the oil palm company’s profit-after-tax increased from N21 billion in 9 M’23 to N28 billion, demonstrating tenacity in a challenging business environment.
Nonetheless, the company’s overall cost of sales increased by 57.5 percent throughout the analyzed period, which resulted from increased production caused by a high rate of inflation and declining purchasing power.
Oil palm and rubber production costs increased from N18.95 billion to N44.63 billion. According to the financials, the cost of producing oil palm increased by 54.4 percent in just nine months, from N17.3 billion to N38 billion.
Similarly, the company’s production costs for its rubber goods increased from a pitiful N1.6 billion to N6.5 billion, a staggering 75.38 percent increase that suggests the market prices of rubber and palm oil have risen.
Okomu’s net cash inflow climbed by 17.05 percent during the nine-month fiscal term of 2024, from N25.3 billion to N30.5 billion, driven by a 38.36 percent growth in customer receipts.
Similarly, the purchase of plant, property, and equipment (PPE) increased from N4.1 billion to N8.5 billion, resulting in a 48.43% decrease in its net cash outflow from investing operations from N4.46 billion to N2.3 billion.
At the end of the period, the closing balance of cash and cash equivalents was N5.5 billion, less than the N12.3 billion in the same period in 2023.
In the meantime, overall net assets increased slightly from N43.5 billion reported the previous year to N46.2 billion during the reference year.
