FSDH Initial Reaction: Presco 4Q21 results 
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February 1, 2022/FSDH Research

Key Performance Highlights:

• Presco, a fully-integrated agro-industrial establishment with oil palm plantations and vegetable oil refining plant, published its 4Q21 numbers on January 30, with strong operating performance and recording blockbuster bottom-line results compared to the prior-year period. Presco recorded a robust 161.0% YoY revenue growth to N13.0 billion in 4Q21, as Nigeria’s palm oil industry continues to recover through the pandemic. The company outperformed last quarter’s performance, with the revenue marginally up by 1.7% QoQ against 3Q21.
   
• The exhilarating top-line performance was partially offset by a 236.6% YoY increase in the cost of sales (-8.6% QoQ), resulting in a 9.1% contraction in gross margin to 59.3% in 4Q21. The company’s Administrative Expenses soared 49.3% YoY, while the Selling & Distribution expenses grew substantially by 93.1% YoY. On the other hand, the company recorded Other gains of N431 million, down 62.6% YoY in this quarter compared to gains of N1.1 billion in the prior-year period. The robust top-line and operating results percolated down as the company reported a solid 64.9% YoY growth in operating profit to N6.2 billion.
   
• The net finance cost declined 89.3% YoY to N68 million in 4Q21 compared to N639 million in the prior-year period, as the company continued to refinance its high-cost debt. Thus, sharp revenue growth and lower finance costs propelled profit after tax up by a whopping 304.2% YoY to N5.1 billion in 4Q21 from N1.3 billion a year back. The profits also grew handsomely compared to the 3Q21 results (+39.6% QoQ), owing to impressive sequential revenue growth in 4Q21. The EPS was reported at N5.09/share in 4Q21 against N1.26/share in 4Q20, a 4.0x increase. Presco paid a dividend of N2.00 billion for the period ended December 31 2021.
   
• Presco has offered SNL SA to acquire 100 percent of the 7.33 billion ordinary shares of SNL held by SIAT SA for a cash consideration of N21 billion. This translates to a price of approx. N2.865 for each ordinary share in SNL. As a result of the Acquisition, SNL will become a wholly-owned subsidiary of Presco.

Market Reaction: Investor reaction to the blockbuster 4Q21 results was overwhelming as the Presco stock closed 9.97% higher at N96.55, versus a 0.91% gain for the All-Share Index (31/1).

Presco Earnings Highlight 4Q21

Source: Company Financials, FSDH