FSDH Initial Reaction: Presco FY22 results
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February 1, 2023/FSDH Research
Key Performance Highlights:
- Presco published its FY22 numbers, registering a massive 75.1% YoY revenue growth. Presco and Okomu Oil Palm Company are the most prominent players in Nigeria’s oil palm space, with Presco outperforming its closest competitor (Okomu Oil: 58.4% YoY revenue growth in FY22) this year. The company recorded a robust 75.1% YoY revenue growth to N83.1 billion in FY22 compared to N47.4 billion in FY21.
- The solid top-line performance was partially offset by a 122.0% YoY increase in the cost of sales, resulting in an 884 bps YoY contraction in gross margin to 58.1% in FY22. The company’s administrative expenses soared 80.0% YoY to N17.0 billion, and the selling & distribution expenses ballooned 125.8% YoY to N1.7 billion in FY22. The increase in expenses was primarily due to rising inflationary pressures. Moreover, the company incurred other losses of N220 million this year compared to gains of N313 million in FY21, and gains from biological assets declined 35.4% YoY to N4.5 billion in FY22. However, the Other Operating Income vaulted 13x YoY to N1.6 billion this year compared to N127 million in FY21. Consequently, the company reported a 22.5% YoY rise in operating profit to N35.5 billion in FY22.
- The net finance cost shot up 3x YoY to N7.8 billion in FY22 compared to N2.6 billion in the prior year, mainly due to an increased interest on the long-term loan that jumped 2.6x to N59.0 billion in FY22. However, the company recorded an effective tax rate of 22.3% in FY22 compared to 26.8% in FY21, resulting in a net profit of N21.5 billion in FY22, against N19.3 billion a year back. Presco reported an earning per share of N21.47 in FY22 compared to N19.32 last year. The company’s EBITDA and operating margins fell by 1942 bps and 1832 bps YoY in FY22, primarily due to elevated cost pressures in 2022.
Market Reaction: The investor reaction to the robust FY22 results was muted as the Presco stock remained unchanged at N150.80, versus a 0.49% gain for the All-Share Index (1/2).
Presco Earnings Highlight FY22
Source: Company Financials, FSDH