Palm Oil Windfall Conceals Diverging Risk Profiles

By Kingsley Ani

Nigeria’s listed palm oil leaders have ridden a powerful earnings upswing, but the three-year boom has also exposed sharply different strategic risk paths between Presco Plc and Okomu Oil Palm Plc.

Between 2023 and 2025, the two companies generated a combined N529 billion in profits, converting what was broadly a hostile macroeconomic environment into one of the most profitable cycles in the sector’s recent history. Their unaudited full year 2025 results confirm that currency devaluation, import substitution and domestic price premiums have materially reset industry economics.

The key interpretative issue is no longer whether the boom is real. It is whether the current earnings trajectory is structurally durable or heavily dependent on macro tailwinds that may moderate.

DECISION HIGHLIGHT

The latest results reveal three defining shifts.

First, Presco Plc has established clear scale dominance, with revenue and profit expanding at a faster pace than its closest rival.

Second, Okomu Oil Palm Plc continues to outperform on capital discipline and dividend intensity, maintaining one of the highest payout ratios on the Nigerian Exchange.

Third, both companies have materially benefited from naira devaluation and import substitution dynamics that pushed domestic crude palm oil prices to steep premiums.

The period has effectively redrawn the competitive map of Nigeria’s palm oil industry.

DECISION MEMO

The palm oil surge is less about operational miracle and more about macroeconomic realignment working in favour of domestic producers.

Following foreign exchange unification in mid-2023, the naira depreciated by more than 70 percent against the United States dollar. Imported crude palm oil became prohibitively expensive, forcing the domestic market to reprice sharply upward. Local producers suddenly found themselves operating behind a powerful price umbrella.

Presco moved most aggressively to monetise the moment. Revenue expanded from N102.42 billion in 2023 to N331.19 billion in 2025, while profit after tax surged to N138.12 billion. The company’s operating margin approached 65 percent, reflecting the earnings leverage of its integrated refining structure and expanding asset base.

Okomu’s performance was also strong but strategically more conservative. Revenue rose from N75.52 billion to N198.15 billion over the same period, while profit after tax reached N63.53 billion. Its gross margin of about 70 percent slightly exceeded Presco’s 69 percent, underscoring strong plantation efficiency. However, its operating margin of 45 percent lagged Presco’s scale driven advantage.

Balance sheet strategy marks the clearest divergence. Presco expanded aggressively, with total assets jumping to N833.4 billion in 2025, supported by a rights issue and debt funded acquisitions, including consolidation of Ghana Oil Palm Development operations. Borrowings climbed to N164.1 billion, embedding higher forward leverage.

Okomu chose the opposite path. With equity around 56 billion naira and modest borrowing, the company prioritised cash generation and shareholder returns over rapid asset accumulation. Its payout ratio of roughly 99 percent reinforces that positioning.

The result is a classic growth versus conservatism split. Presco is building continental scale capacity. Okomu is optimising yield and cash discipline.

DATA BOX

Sector Performance Snapshot

• Combined profits 2023 to 2025: N529 billion
  • Naira depreciation since mid-2023: over 70 percent

Presco Plc
• Revenue 2023: N102.42 billion
• Revenue 2024: N207.50 billion
• Revenue 2025: N331.19 billion
• Profit after tax 2023: N32.35 billion
• Profit after tax 2025: N138.12 billion
• Operating margin 2025: about 65 percent
• Total assets 2025: N833.4 billion
• Borrowings 2025: N164.1 billion
• Dividend payout 2025: N72 billion, about 52 percent

Okomu Oil Palm Plc
• Revenue 2023: N75.52 billion
• Revenue 2025: N198.15 billion
• Profit after tax 2023: N20.65 billion
• Profit after tax 2025: N63.53 billion
• Gross margin 2025: about 70 percent
• Operating margin 2025: about 45 percent
• Export contribution 2025: N25.5 billion
• Equity 2025: about N56 billion
• Dividend payout 2025: N62.96 billion, about 99 percent

WHO WINS / WHO LOSES

Winners
Both companies have benefited materially from currency driven pricing power and import substitution. Presco shareholders gain from scale expansion and earnings acceleration. Okomu shareholders benefit from exceptionally high cash returns.

Conditional Winners
Domestic agriculture and plantation ecosystems gain from renewed investor attention to the palm oil value chain.

Potential Losers
Import dependent edible oil traders face structurally higher local competition.

At Risk
Highly leveraged expansion at Presco introduces balance sheet sensitivity if palm oil prices normalise.

POLICY SIGNALS

The earnings cycle reinforces Nigeria’s import substitution thesis in agricultural commodities. Currency weakness has effectively acted as industrial policy by raising the domestic protection barrier.

The divergence between Presco and Okomu also highlights two viable corporate responses to Nigeria’s volatile macro environment, scale expansion versus balance sheet conservatism.

INVESTOR SIGNAL

For equity investors, the sector remains attractive but increasingly differentiated.

Presco offers the higher growth, higher leverage story with stronger operating leverage and continental ambitions. Okomu provides the defensive income profile, anchored on high payout consistency and lower financial risk.

Future investor positioning will likely hinge on expectations for palm oil price sustainability and domestic demand strength.

If current price premiums persist, Presco’s aggressive expansion could deliver outsized upside. If margins normalise, Okomu’s conservative structure may prove more resilient.

RISK RADAR

Price Normalisation Risk
Current profitability is heavily supported by domestic price premiums of 80 to 100 percent above global parity. Any convergence could compress margins.

Leverage Risk
Presco’s rising borrowings increase sensitivity to interest rates and commodity price swings.

Macro Reversal Risk
A stabilising naira could reduce the import substitution advantage currently supporting local pricing.

Agronomic Risk
Plantation yields remain exposed to weather variability and biological asset volatility.

Dividend Sustainability Risk
Okomu’s near total earnings payout leaves limited internal buffer for large scale expansion if market conditions shift.

Nigeria’s palm oil leaders have converted macro dislocation into exceptional earnings momentum. The next phase will be less forgiving. The durability of domestic price premiums and the discipline of capital allocation will determine whether this super cycle evolves into a structurally higher earnings plateau or gradually normalises as macro conditions stabilise.