FSDH Initial Reaction: Presco 1Q24 results 
Kindly click here to download the report.

May 2, 2024/FSDH Research

Key Performance Highlights:

• Presco published a solid set of 1Q24 numbers, registering a 94.1% YoY revenue jump and a significant growth of 141.5% in the net profit. Presco, a prominent player in Nigeria’s oil palm space, recorded a robust revenue of N42.5 billion in 1Q24 compared to N21.9 billion in 1Q23. The cost of sales increased 53.5% YoY to N8.7 billion in 1Q24, mainly due to higher expenses related to the upkeep of mature plantings, harvesting and labour charges. However, as the cost of the sales increase was less than proportionate to the total sales, the company’s gross profit soared 108.4% YoY to N33.8 billion in 1Q24. Consequently, the gross margin improved by 544 bps YoY to 79.4% in 1Q24 compared to 74.0% in 1Q23.
   
• In 1Q24, the company’s administrative expenses vaulted 86.8% YoY to N7.6 billion, and the selling & distribution expenses also grew 70.6% YoY to N520 million. However, Presco reported exchange gains increased 80.1% YoY to N5.4 billion and other operating income rose 190.5% YoY to N675 million in 1Q24. Ultimately, the operating profit reached N31.8 billion, showcasing a significant growth of 110.7% YoY compared to N15.1 billion in 1Q23. Consequently, the operating margin expanded by 585 bps YoY to 74.6% in 1Q24 vs 68.8% in 1Q23.
   
• Net finance costs declined by 4.3% to N2.1 billion. Although finance costs increased 4.2% YoY to N2.3 billion, the finance income of N186 million (1Q23: NIL) led to an overall improvement in net finance costs. The company recorded an effective tax rate of 18.9% in 1Q24 compared to 22.7% in 1Q23, resulting in a net profit of N24.1 billion in 1Q24, against N10.0 billion in 1Q23. The company’s earnings per share came in at N24.06 in 1Q24 versus N9.96 in 1Q23, a massive 141.5% YoY rise. Moreover, EBITDA soared to N32.8 billion, up 104.7% YoY, while the EBITDA margin expanded 400 bps YoY to 77.2%.
   
• On a sequential basis, the revenue in 1Q24 was up 61.9% QoQ to N42.5 billion (4Q23: N26.3 billion), while the cost of sales decreased 26.6% QoQ to N8.7 billion in 1Q24 (4Q23: N11.9 billion). Operating profit stood at N31.8 billion, up 126.5% QoQ compared to N14.0 billion in 4Q23, mainly due to robust sales and efficient cost management. The net finance costs declined 10.8% QoQ to N2.1 billion in 1Q24 (4Q23: N2.3 billion). As the company’s effective tax rate declined to 18.9% in 1Q24 compared to 40.5% in 4Q23, net profit vaulted 246.3% QoQ to N24.1 billion in 1Q24 compared to N6.9 billion in 4Q23. Consequently, the company’s net margin expanded by 3,011 bps QoQ to 56.5% in 1Q24, and the EBITDA margin was boosted by 1,988 bps QoQ to 77.2% in 1Q24.
   
• On 30 April 2024, Presco announced the appointment of Mr. Olakanmi Rashid Sarumi as a Chairman, Mrs Grace Titilayo Osuntoki as Independent Non-Executive Director, and Mr Abdul Akhor Bello as a Non-Executive Director.
   
• On 15 March 2024, Presco notified that Oak and Saffron Limited, a holding company established for Oil Palm, Rubber and Horticulture businesses, concluded a transaction with Fimave N.V to acquire 86.7% of its shareholding in SIAT N.V, which in turn holds 60% stake in Presco Plc. The transaction was completed on 4 March 2024.

Market Reaction: The investor reaction to the 1Q24 results was buoyant as the Presco stock jumped 10.0% to close at N229.90 versus a 0.55% gain for the All-Share Index (2/5).

Presco Earnings Highlight 1Q24

Source: Company Financials, FSDH