FSDH Initial Reaction: Presco 3Q23 results 
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October 30, 2023/FSDH Research

Key Performance Highlights:

• On 27 October 2023, Presco published a solid set of 3Q23 numbers. The company, a prominent player in Nigeria’s oil palm space, registered a 64.6% YoY revenue jump and a significant growth of 249.5% in the net profit. Presco recorded a robust revenue of N28.8 billion in 3Q23 compared to N17.5 billion in 3Q22. The cost of sales increased 29.2% YoY to N11.4 billion in 3Q23. As the cost of the sales increase was less than proportionate to the total sales, the company’s gross profit soared 102.9% YoY to N17.0 billion in 3Q23. Consequently, the gross margin improved by 1,118 bps to 59.2% in 3Q23 compared to 48.0% in 3Q22, driven by the solid top-line performance.
   
• The company’s administrative expenses vaulted 45.8% YoY to N5.2 billion, while the selling & distribution expenses dropped 39.6% YoY to N418 million in 3Q23. Moreover, the company incurred other losses of N268 million in 3Q23 compared to N73 million in 3Q22. However, the Other Operating Income increased 71.4% YoY to N685 million during the quarter compared to N400 million in 3Q22. The company’s exchange gains reduced by 10.6% in 3Q23 to N1.0 billion from N1.2 billion in 3Q22. In 3Q23, Presco recorded a 129.4% YoY rise in operating profit to N12.8 billion in 3Q23.
   
• The net finance cost declined 5.3% YoY to N2.0 billion in 3Q23 compared to N2.1 billion in the prior year period. Moreover, the company recorded an effective tax rate of 22.6% in 3Q23 compared to 31.2% in 3Q22, resulting in a net profit of N8.4 billion in 3Q23, against N2.4 billion in the prior-year period. The company’s earnings per share came in at N8.40 in 3Q23 versus N2.40 in 3Q22, a massive 249.5% YoY rise. Furthermore, Presco’s EBITDA and operating margins grew 783 bps and 1,261 bps YoY in 3Q23, primarily due to solid top-line performance in 3Q23.
   
• On a sequential basis, the revenue in 3Q23 was up 10.1% QoQ to N28.8 billion (2Q23: N26.2 billion), while the cost of sales increased 12.0% QoQ to N11.7 billion in 3Q23 (2Q23: N10.5 billion). The administrative expenses decreased 7.1% QoQ to N5.2 billion, while the selling and distribution expenses grew 19.3% QoQ to N418 million. The net finance costs expanded 7.0% QoQ to N2.0 billion in 3Q23. As the company’s effective tax rate declined to 22.6% in 3Q23 compared to 36.0% in 2Q23, net profit vaulted 64.0% QoQ to N8.4 billion in 3Q23 compared to N5.1 billion in 2Q23. Consequently, the company’s net margin expanded by 959 bps QoQ, and the EBITDA margin was boosted by 666 bps QoQ.

Market Reaction: The investor reaction to the 3Q23 results was muted as the Presco stock remained unchanged at N181.00, versus a 0.08% gain for the All-Share Index (27/10).

Presco Earnings Highlight 3Q23