BusinessDay 07 Nov 2017

14
BUSINESS DAY
COMPANIES & MARKETS
C002D5556
Tuesday 07 November 2017
Okomu Oil’s winning streak
continues on government policy
BALA AUGIE
Okomu Oil Palm
Plc has continued
its sales winning
streak as government
policies gave
the company edge over competitors
who are grappling with
a currency woe.
The ban on importers of
certain items in accessing the
foreign exchange was an advantage
to oil palm producers as the
demand for local goods spiked.
Profit at Okomu, a Benin
City-based manufacturer of the
edible oil, increased by 51.39
percent in the nine month to
September as sales jumped
53.14 percent to N6.39 billion,
according to results published
in October.
The oil palm producer’s
shares have gained 61.81 percent
since the start of the year
while market capitalization
stood at N62.0 billion as at November
5.
“In the aftermath of CBN
policy pronouncement regarding
CPO imports, domestic
prices surged 144% over 2016
to N661.4/kg a importers who
account for 29% of local supply
cutback on imports,” said
analysts at ARM Research in a
recent report.
“CPO price was in an upward
trajectory as it spiked to
N650 per kilogram in December
2016 from N273 as at December
2015,” according to the ARM
Research report.
Nigeria, Africa’s most populous
nation was once the largest
exporter of CPO in the 60’s but
the discoveries of black gold in
the early seventies resulted in
neglect of the palm sector.
According to recent report
by USAD, Indonesia’s total production
for 2016 was 35 million
metric tonnes, Malaysia; 19.50
million metric tonnes, others;
4.94 million, Thailand; 2.30 million
metric tonnes, Columbia;
1.14 million metric tonnes, and
Nigeria, 970,000.
“We continue to believe that
local palm oil producers are in
an advantageous position relative
to importers (competitors)
due to CBN policies which have
encouraged local production
and also translated to favorable
pricing,” said analysts at FBN-
Quest Limited.
While the company’s sales
and profit have continues to
spike amid a volatile and unpredictable
macroeconomic
environment, margins dipped in
the period under review.
Gross margins fell to 85.04
percent in the period under
review from 88.44 percent as at
September 2016.
“The subsisting FX ban on
imported CPO at the interbank
market leaves importers
subjected to the vagaries at the
parallel market,” according to
analysts at ARM Research
Will markets listen to hawkish talk
from the Bank of England?
The fallout from the BoE rate decision and the health of the US economy will be in focus
Roger Blitz and
Michael Mackenzie
Here are the major
questions for markets
as a new trading
week begins.
Will markets listen to hawkish
talk from the Bank of England?
The first UK interest rate
rise in a decade is not a “one
and done” move, the BoE
insists, but that is precisely
how the market viewed it. The
pound fell and two-year gilt
yields dropped, holding below
the new base rate, as investors
branded the quarter-point rise
in overnight borrowing costs to
0.5 per cent as a “dovish hike”.
The BoE fightback began
on Friday, with deputy governor
Ben Broadbent taking to
the airwaves to argue a couple
more rate rises were needed
to get inflation on track. More
communication of this kind is
likely to emerge in the coming
weeks, but it is a sizeable
boulder the BoE must try to
push uphill.
That is in part because of
concern among some investors
last week’s rise may turn
out to be a policy mistake.
John Wraith, a strategist at
UBS, said a slowing economy,
Brexit uncertainty and inflation
retreating makes another rate
rise hard to justify.
The hike “may come to
be seen as a mistake unless a
range of important data indicators
start to improve soon”,
Mr Wraith said. However, data
on Friday showing a surprise
pick-up in services in October
offered some hope, but the
pound moved only marginally.
“Data surprises are likely
to have to be material and
consistent to dramatically alter
expectations for the probability
of a near-term follow-up hike
early in 2018,” said Sam Hill,
an economist at RBC Capital
Markets.
Brexit talks are the more
likely to shift sterling this week,
along with dollar-related developments.
Still Desperately seeking
the Phillips Curve
That is the upshot after
Friday’s US employment report,
for October, with wage growth
flat even as the unemployment
rate dropped. There is still one
more jobs report before the December
meeting of the Federal
Reserve. For now bond traders
expect another quarter percentage
point rise from the Fed,
but expect fewer than two rate
rises next year. That lags the US
central bank’s own projections.
TD Securities analysts say:
“While the pace of hikes next
year is lower than implied by
the Fed dot plot, a continued
lack of inflation pressures
should skew the market to pricing
in fewer hikes.’’
But faith in a tighter jobs
market finally spurring inflation
does hold sway in some
quarters.
“Notwithstanding the low
level of CPI inflation, stronger
growth is causing markets to
reprice US rate expectations
to the upside. Yet expectations
remain well below the dot
plot,” caution analysts at Bank
of America Merrill Lynch. “We
think further adjustment is
needed, pushing yields and
the dollar higher into year end.”
While this debate will keep
running the upshot remains
one of a very slow rate-tightening
schedule from the Fed. Such
an outcome stands to remain
very supportive for markets. So
long as money remains easy,
already elevated valuations
for credit and equities have
room to rise further and only
heighten concerns that asset
prices are in bubble territory.
Further gains for oil and
metals?
Industrial commodities
from oil, copper and niche
metals such as cobalt have been
on a tear, buoyed partly by the
improving global economy and
efforts to limit production.
L-R: Umoren Akpan, general manager, Audit, Intercontinental Distillers Limited; Patrick Anegbe,
managing director, Intercontinental Distillers Limited, and Bola Obasanjo, wife of the former President
of Nigeria, Olusegun Obasanjo, at the Company’s Distributors Award held in Abeokuta, recently.
West African students honour First Bank
manager on youths development
SIKIRAT SHEHU, Ilorin
For its sustained investment
in capacity
building and human
capacity development
among the youths, the West
African Students Union has
lauded First Bank PLC for its
continental roles and development,
just as the Union
honoured Egbodogo Festus
Adesinbo, a Business Development
Manager located in Ilorin,
the Kwara state capital.
The choice of Adesinbo
and First Bank PLC was
borne out of First Bank PLC
investment in African youths
development, its capacity to
reduce unemployment in Nigeria
and West Africa, which
prompted the West African
Students Union to honour
the Manager and First Bank
PLC with a deserved award,
urging the management of
First Bank PLC to continue
to play a impactful roles in
developing the capacity of
youths in Nigeria.
A delegation of the Sub-
Regional Students Union led
by Jimmy Kennedy and Dominique
Kakou from the Republic
of Benin and Cote D’ivoire
respectively, identified with
the key roles the continental
bank is playing in the capacity
building of the youths across
the country.
They noted that the Award
of Excellence to Business Development
Manager of Kwara
State Office of First Bank PLC
in Ilorin, Kwara state capital
on Tuesday, asking other
corporate organisations operating
in the West African
countries to toe the path of
greatness that will make the
lives of African youths better
off.