Presco posts N2.4billion profit amid 1,900% rise in net finance costs

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BY BAMIDELE FAMOOFO

Uba Group

Presco Plc, the Edo State based agro-allied company, reported a net profit of about N2.4 billion in third quarter of 2022 despite rising pressure from financing its loans.

Notably, net finance costs rose dramatically by 1,900 percent from N104.9 million as at September 30, 2021 to N2.1 billion in third quarter ended September 30, 2022.

Revenue grew by 37.0 percent y/y in Q3-22, primarily driven by (1) increased volumes and (2) higher CPO prices. However, on a q/q basis, revenue declined by 20.8 percent q/q to N17.50 billion in Q3-22 (Q2-22: N12.10 billion), largely due to relatively lower volumes.
Gross margin contracted by 675bps to 48.0 percent in Q3-22 (Q3-21: 54.8%) following a faster rise in the cost of sales (+57.5% y/y) relative to revenue (+37.0% y/y). We attribute the higher cost to the (1) elevated energy costs and (2) increased cost of fertilizers following the surge in crude oil prices. Accordingly, EBITDA (-480bps y/y) and EBIT (-514bps y/y) margins declined to 37.4 percent and 32.0 percent, respectively, following the fall in gross margin (-675bps y/y) and a 50.6 percent y/y increase in operating expenses.
Net finance cost surged to N2.10 billion (Q3-21: N104.90 million) due to a higher interest expense in the absence of any finance income in the period.
Overall, profit before tax declined by 24.7 percent y/y to N3.49 billion (Q3-21: N4.64 billion). Following a tax expense of N1.09 billion (vs N988.36 million in Q3-21), profit after tax came in at N2.40 billion (Q3-21: N3.65 billion).

Presco posts N2.4bn profit amid 1,900% rise in net finance costs

BAMIDELE FAMOOFO

Presco Plc, the Edo State based agro-allied company, reported a net profit of about N2.4 billion in third quarter of 2022 despite rising pressure from financing its loans.

Notably, net finance costs rose dramatically by 1,900 percent from N104.9 million as at September 30, 2021 to N2.1 billion in third quarter ended September 30, 2022.

Revenue grew by 37.0 percent y/y in Q3-22, primarily driven by (1) increased volumes and (2) higher CPO prices. However, on a q/q basis, revenue declined by 20.8 percent q/q to N17.50 billion in Q3-22 (Q2-22: N12.10 billion), largely due to relatively lower volumes.
Gross margin contracted by 675bps to 48.0 percent in Q3-22 (Q3-21: 54.8%) following a faster rise in the cost of sales (+57.5% y/y) relative to revenue (+37.0% y/y). We attribute the higher cost to the (1) elevated energy costs and (2) increased cost of fertilizers following the surge in crude oil prices. Accordingly, EBITDA (-480bps y/y) and EBIT (-514bps y/y) margins declined to 37.4 percent and 32.0 percent, respectively, following the fall in gross margin (-675bps y/y) and a 50.6 percent y/y increase in operating expenses.
Net finance cost surged to N2.10 billion (Q3-21: N104.90 million) due to a higher interest expense in the absence of any finance income in the period.
Overall, profit before tax declined by 24.7 percent y/y to N3.49 billion (Q3-21: N4.64 billion). Following a tax expense of N1.09 billion (vs N988.36 million in Q3-21), profit after tax came in at N2.40 billion (Q3-21: N3.65 billion).