October 30, 2023/Cordros Report

PRESCO published its Q3-23 unaudited financials on Friday (27 October), revealing a significant increase (+249.5% y/y) in standalone EPS to NGN8.40 in Q3-23 (Q3-22: NGN2.40), underpinned by impressive revenue growth (+64.6% y/y) and lower net finance costs (-5.3% y/y). For 9M-23, the EPS printed NGN23.47 (9M-22: NGN15.88), recording an increase of 47.8%.

PRESCO’s revenue in Q3-23 grew by 64.6% y/y (9M-23: +29.8% y/y), primarily due to (1) effect of devaluation on local Crude Palm Oil (CPO) prices, and (2) PRESCO’s volume deluge in 2023. Sequentially, on a q/q basis, turnover increased by 10.1%.

Gross margin (+11.18ppts y/y) increased to 59.2%, following a slower increase in the cost of sales (+29.2% y/y) relative to revenue (+64.6% y/y). We attribute the higher cost to the impact of increased fertilizer costs in the period. Consequently, EBITDA (+10.70ppts) and EBIT (+12.61ppts) margins rose to 48.1% and 44.6%, respectively, following the stronger gross margin amid a rise in operating expenses (+32.0% y/y).

PRESCO’s net finance charges declined by 5.3% y/y to NGN1.99 billion (Q3-22: NGN2.10 billion), driven by a contraction in finance cost (-4.3% y/y to NGN1.99 billion), amid a NGN20.97 million gain in finance income (Q3-22: Nil).

Overall, PRESCO’s PBT increased by 210.6% y/y to NGN10.85 billion in Q3-23 (Q3-22: NGN3.49 billion). A tax expense of NGN2.45 billion (+124.7% y/y) resulted in a PAT of NGN8.40 billion in the period (Q3-22: NGN2.40 billion).

Comment: PRESCO’s Q3-23 overall performance outperformed expectations highlighting the impact of the devalued currency on CPO prices. Considering the resilience witnessed so far in 2023, we expect the company to see out the year positively, maintaining strong expansions in its top and bottom lines. Our estimates are under review.