July 30, 2024/CSL Research
Presco Plc (PRESCO) in its half year 2024 results reported an impressive 83.1% y/y growth in Revenue to N88.02bn from N48.07bn (H1 2023). Also, on a q/q basis, Revenue grew marginally by 6.9% to N45.48bn (Q2 2024) from N42.55bn (Q1 2024). The significant growth in H1 revenue was primarily driven by increased local demand for crude palm oil (CPO) for both industrial and household uses. The company experienced higher sales of CPO, mill by-products, and Fresh Fruit Bunches (FFB), coupled with upward price adjustments. Additionally, the global price of CPO rose by 6.2% to US$845 per tonne during the first half of 2024, contributing to the Revenue growth.
The Cost of Sales grew slower than Revenue, up only 38.6% y/y to N22.43bn, up from N16.18bn in H1 2023. However, on a q/q basis, the Cost of Sales rose significantly by 56.4%, reaching N13.68 billion in Q2 2024, compared to N8.75 billion in Q1 2024. This substantial quarterly increase was primarily due to intensified oil palm plantation activities in preparation for the dry season. As a result, the company’s Gross Margin improved to 74.5% in H1 2024, up from 66.3% in H1 2023. Gross Profit also saw substantial growth, increasing by 105.7% y/y to N65.59bn from N31.89bn. However, on a q/q basis, Gross Profit decreased by 5.9%, falling to N31.79bn in Q2 2024 from N33.8bn in Q1 2024.
Despite an increase in Operating Expenses due to a high-cost business environment—rising by 51.1% y/y to N14.8 billion, up from N9.8 billion in H1 2023—Presco Plc (PRESCO) saw growth in its EBITDA margin, which increased by 11.7 percentage points to 57.7%. Overall, the company reported an Operating Profit of N50.79 billion in the first half of 2024, a significant 130% y/y increase. However, in the second quarter of 2024, Operating Profit declined by 7.3% q/q to N24.4 billion, down from N26.36 billion in Q1 2024.
PRESCO reported a significant increase in Finance Income, which rose to N382 million in H1 2024 from N8.62 million in H1 2023. This increase was primarily driven by higher interest earnings on the company’s fixed deposit balances. Meanwhile, Finance Costs, which include interest expenses on loans and overdrafts, increased by 8.9% y/y to N4.42bn, up from N4.06bn in the same period last year. The company also reported a foreign exchange (FX) gain of N3.68bn for the first half of 2024, compared to an FX gain of N2.86 billion in H1 2023. However, in Q2 2024, they reported an FX loss of N1.71 billion.
Overall, the business reported N38.88bn in Profit After Tax, up 157.8% y/y. Q/q, PAT was down by 38.4% to N14.82bn from N24.06bn (Q1 2024).
We have a Hold recommendation on Presco with a price target of N307/s. Current price is N383/s.
Kindly click on the below link to download the full report.
Presco H1 2024 Quick Take.pdf
