Presco Plc (PRESCO) published its Q4-22 unaudited financials Tuesday, reporting a standalone EPS of NGN3.48 (Q4-21: NGN5.09), underpinned by a sharp uptick in net finance cost (+5736.7% y/y). For 2022FY, the EPS settled at NGN21.47 (2021FY: NGN19.32), recording an increase of 11.1 per cent.
PRESCO’s revenue grew by 218.3% y/y in Q4-22 (2022FY: +75.1% y/y), driven by a sustained increase in Crude Palm Oil (CPO) production volumes. Sequentially, on a quarter-on-quarter basis, revenue grew by 136.3 per cent.
Gross margin contracted by 15.74ppts to 43.6% in Q4-22 (Q4-21: 59.3%), influenced by the significant growth in the cost of sales (+341.5% y/y). We believe that higher diesel prices must have resulted in higher energy costs, which constitute the bulk of PRESCO’s total costs. Consequently, the operating margin declined by 25.56ppts to 22.4% (Q4-21: 48.0%) amid a 348.9% y/y decline in operating expenses.
Net finance rose significantly by 5736.7% y/y to NGN3.98 billion in Q4-22 (Q4-21: NGN72.53 million) on the back of a 5380.6% y/y increase in finance costs.
Overall, profit before tax declined by 14.0% y/y to NGN5.30 billion in Q4-22. Following a tax expense of NGN1.82 billion, profit after tax came in at NGN3.48 billion (Q4-21: NGN5.09 billion) representing a decline of 31.7% y/y.
In their review comment, market experts at Cordros Capital said “PRESCO’s Q4-22 performance was underwhelming, highlighting the impact of lower prices on revenue, especially in its off-peak period. Also, we remain concerned about the burgeoning cost pressures following the effects on margins. Nevertheless, we are optimistic about the company’s 2023FY performance, as we expect higher volumes from the company’s Sapkomba and acquired SNL estates to support revenue amid depressed prices. Nonetheless, we believe cost pressures will remain a sticking point for the CPO planter.”
(Business Hilights)
