FSDH Initial Reaction: Presco FY23 results 
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February 1, 2024/FSDH Research

Key Performance Highlights:

• On January 31, 2024, Presco posted solid FY23 numbers, marked by solid revenue growth and improved margins driven by effective cost management. The Company experienced a substantial increase in revenue, reaching N103.1 billion, representing a robust growth of 27.3% YoY. The sale of crude and refined products, which constituted nearly all of Presco’s total revenue, drove the growth. However, sales of Mill by-products also exhibited remarkable Year-over-Year growth.
   
• Presco increased its production to build up its inventory to meet the demand throughout the year. Subsequently, the Cost of Sales for FY23 amounted to N39.80 billion, reflecting a notable increase of 28.3% YoY. Despite the increase in Cost of Sales, Presco achieved a gross profit of N63.3 billion, up 26.7% YoY, translating to a commendable gross margin of 61.4%. This margin, albeit slightly lower (30 bps) than the previous period, suggested efficient cost management.
   
• The operating profit before finance costs reached N51.8 billion, showcasing a substantial growth of 83.2% YoY. Its worth noting that the operating costs significantly reduced during FY23, primarily due to gains on biological assets and foreign exchange. Consequently, the operating margin expanded by 1,532 bps to 50.2%.
   
• Net finance costs slightly declined by 0.8% to N8.4 billion. Although finance income declined, careful management led to an overall improvement in net finance costs. In FY23, the Company witnessed a major rise in tax expenses of 91.3% YoY to N13.0 billion, reflecting the negative impact of Deferred tax treatment. The Net Profit for the year surged to N30.40 billion, exhibiting a substantial increase of 133.4% YoY. Earnings per share reached N30.42, demonstrating a remarkable YoY growth of 133.4%. Moreover, EBITDA soared to N55.8 billion, up 71.9% YoY, while the EBITDA margin expanded substantially by 1,404 bps to 54.1%.

Market Reaction: The investor reaction to the FY23 results was muted as the Presco stock remained unchanged at N259.00, versus a 1.90% fall for the All-Share Index (31/1).

Presco Earnings Highlight FY23

Source: Company Financials, FSDH