FSDH Initial Reaction: Presco 2Q23 results 
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August 2, 2023/FSDH

Key Performance Highlights:

• Presco published its 2Q23 numbers, registering an 18.4% YoY revenue growth. Presco and Okomu Oil Palm Company are the most prominent players in Nigeria’s oil palm space, with Presco significantly outperforming its closest competitor (Okomu Oil: 58.4% YoY revenue fall in 2Q23) this quarter. The Company recorded a robust revenue of N26.2 billion in 2Q23 compared to N22.1 billion in 2Q22.
   
• The solid top-line performance was more than offset by an 83.6% YoY increase in the cost of sales, resulting in a 1,425 bps YoY contraction in gross margin to 59.9% in 2Q23. The Company’s administrative expenses soared 136.1% YoY to N5.6 billion, and the selling & distribution expenses dropped marginally by 1.4% YoY to N350 million in 2Q23. Moreover, the Company incurred other losses of N12 million this year compared to losses of N13 million in 2Q22. However, the Other Operating Income vaulted 15.4% YoY to N334 million this year compared to N290 million in 2Q22. The Company’s exchange loss reduced by 87.9% in 2Q23 to N139 million from N1.2 billion in 2Q22. Consequently, the Company reported a 22.7% YoY drop in operating profit to N9.9 billion in 2Q23.
   
• The net finance cost fell 22.2% YoY to N1.9 billion in 2Q23 compared to N2.4 billion in the prior year. However, the Company recorded an effective tax rate of 36.0% in 2Q23 compared to 15.7% in 2Q22, resulting in a net profit of N5.1 billion in 2Q23, against N8.7 billion in the prior-year period. The Company’s EBITDA and operating margins fell by 1,305 bps and 2007 bps YoY in 2Q23, primarily due to elevated cost pressures in 2Q23.

Market Reaction: The investor reaction to the 2Q23 results was muted as the Presco stock remained unchanged at N220.00, versus a 0.12% gain for the All-Share Index (2/8).

Presco Earnings Highlight 2Q23

Source: Company Financials, FSDH