BY BAMIDELE FAMOOFO
Presco Plc, a palm oil producing company listed in the Agriculture sector of the Nigerian Exchange Limited reported improved turnover in the fourth quarter of the financial year ended December 31, 2021 with profit buoyed by lower net finance costs.
The chances for shareholders to earn a better dividend at the next Annual General Meeting of the company increased as Earnings Per Share grew by 258.6% to N18.87 from N5.26 in the previous financial year ended December 31, 2020.
Presco’s revenue in Q4-21 stood at N12.99billion representing a growth of 161.2% year-on-year (y/y), driven by the recovery in Crude Palm Oil (CPO) demand coming off the pandemic-induced dip in 2020, and a higher CPO price (Average CPO price: USD1, 347.77/mt in Q4-21 vs USD853.92/mt in Q4-20) facilitated by production shortfalls in Indonesia and Malaysia (c.85.0% of world CPO supply). Sequentially, on a quarter-on-quarter (q/q) basis, turnover grew marginally by 1.7%.
Gross margin declined to 59.3% in Q4-21 as against 68.5% in Q4, 2020 representing a difference of(-911bps) as cost of sales which increased by 236.6% y/y, grew faster than revenue.
“We suspect that higher diesel prices must have resulted in higher energy costs, which constitutes the bulk of PRESCO’s total costs. Consequently, EBIT margin declined by 793bps to 48.0% (Q4-20: 55.8%), further dragged by a 50.9% y/y increase in operating expenses,” analysts at Cordros Research noted.
Meanwhile, Presco’s net finance charges declined significantly by 89.6% y/y to N72.53 million in Q4, 2021 compare to N696.51 million in Q4-20, driven by a lower overdraft balance. The result shows a 64.3% decrease in the company’s overdraft facility to N2.27 billion in FY-21 as against N6.36 billion in FY-20.
Overall, Presco’s Profit before Tax (PBT) increased by 187.9% y/y to N6.17 billion in Q4-21 as against N2.14 billion in Q3, 2020. A tax expense of N1.07 billion resulted in a Profit after Tax (PAT) of N5.09 billion in the period compared with N261.01 million in Q4, 2020.
Commenting on the performance of the company, analysts at Cordros Research in a report said: “Presco’s performance is impressive, as it is in tandem with our expectations following the improved demand for CPO and higher CPO prices. For the year ahead, we highlight that the upsides favouring Nigerian CPO planters such as tight border controls, FX liquidity challenges and the attendant impact on importers, and government support remain existent and should benefit PRESCO’s earnings. Thus, we expect a similar performance in Q1-22. We await the release of the audited results for a dividend declaration.”
