Presco: Q3’16 results show strong growth across key lines
The Nigerian Stock Exchange (NSE) this week published the condensed interim financial statements of Presco Plc for the nine months (Q3) period ended September 30, 2016.
The results show that Presco achieved revenue growth to N11.94billion against N8.04billion in the corresponding period of 2015, an increase of 48.50percent year-on-year (yoy). The company’s gross profit rose by 73.04percent to N8.99billion from N5.20billion in Q3’2015.
Presco operating profit including gains from biological assets rose by 90.79percent to N11.07billion, from N5.80billion in Q3’15. Pre-tax profit rose by 105.15percent year-on-year to N9.71billion, from Q3’15 level of N4.74billion.
After tax profit improved by 98percent to N6.80billion, N3.43billion in Q3’15; while earnings per share (EPS) increased to N6.80, from N3.46 in the nine months period to September 30, 2015. Presco reported foreign exchange (FX) loss of N933.6million in Q3’16 from an FX loss of N487.2million in Q3’2015.
Presco is a fully integrated agro-industrial establishment with oil palm plantations, palm oil mill, palm kernel crushing plant and vegetable oil refining plant. It is at present the only one of such in Nigeria. The company’s share price hovered around N40.25kobo as at Tuesday. Listed on the agriculture sector (crop production subsector) of the NSE Main Board, Presco Plc has a market cap of N40.250billion and shares outstanding of 1 billion units.
Presco, which operates from four estates: Obaretin Estate, Ologbo Estate, Sakponba Estate in Edo State and Cowan Estate in Delta State specialises in the cultivation of oil palm and in the extraction, refining and fractionation of crude palm oil into finished products.
Presco supplies speciality fats and oils to customers’ specification and assures a reliability of supply of its products all year round. This is made possible by the integrated nature of the company’s production process.
“Although Presco reported foreign exchange loss of N934million during the period, the impressive profit line was boosted by a gross margin expansion of 1073basis points (bps) y/y to 75.3percent and a 98percent y/y rise in biological asset revaluation gains to N4.4billion.
However, excluding the biological asset revaluation gain, PBT would have been up 12.1% y/y,” according to Kingston Nwosu team of research analysts at Lagos-based FBNQuest .
“Presco has continued to ramp up production in line with its expansion plans and has been a beneficiary of the government’s policy restricting access to FX for CPO imports at the interbank market. As such, the company has continued to report decent sales and profits in recent quarters,” the analysts added, noting that they expect a positive reaction from the market.
“The major driver of revenues includes strong sales from palm oil products. Sales revenue depends mostly on product yield, which in our view is affected by changing weather conditions. While the critical earning periods are the first two quarters, we expect the company to achieve strong revenue and profit growth in the medium to long term given its performance thus far,” said research analysts at Dunn Loren Merrifield.
“Supportive of our view is the growth and significant transformation in the company’s biological assets. Gross profit improved to N8.99billion as cost of sales rose at a much slower pace relative to revenue growth. This in combination with strong gains in changes in fair value of biological assets lifted operating profit including gains from biological assets to N11.07billion”, the analysts noted.
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