November 12, 2026/InvestmentOne Report
PRESCO’s 9M:2026 revenue rose just 0.74% YoY to NGN276.54bn, a sharp slowdown from the growth seen in previous years. Nigerian sales increased 12.66% to NGN222.02bn, but Ghana fell 21.57% to NGN54.53bn, while no German revenue was reported after NGN7.91bn in 9M:2025. Sales of crude and refined products declined 1.50%. Okomu’s management reported domestic palm oil prices falling nearly 30% since December 2025. Nigeria reduced its crude palm oil import tariff to 28.75% from 35%, while the H1:2026 import bill rose to NGN91.62bn from NGN15.61bn. Despite global palm oil prices rising 12.10% YoY to an average of USD1,131 per tonne in 9M:2026 based on data from world bank, domestic prices faced downward pressure as the stronger naira and lower import tariffs reduced the cost of imported palm oil, making it more competitive against locally produced palm oil.
Seasonality Softens Q3 Margins: Gross profit edged up 0.45% YoY to NGN202.82bn, while gross margin eased 21bps to 73.34%. Q3 margin declined to 47.57% from 83.43% in H1:2026, but improved from 38.07% in Q3:2025. A similar H1-to-Q3 decline occurred last year, in line with the seasonal harvest pattern and PRESCO’s practice of storing oil for sales during leaner months. The improvement from Q3:2025 is encouraging, particularly as other producers face pressure. Okomu Oil Palm reported a 27.59% decline in 9M:2026 PAT despite 5.98% revenue growth, indicating that higher costs are also weighing on profitability across the industry.
Rising Costs Reduce Operating Profit: Administrative expenses rose 16.58% YoY to NGN47.01bn, while selling and distribution costs increased 68.88% to NGN5.24bn. These expenses grew by NGN8.83bn, more than four times the increase in revenue. As a result, operating profit declined 5.31% to NGN157.16bn and the margin narrowed to 56.83% from 60.46%. Higher staff, transportation, insurance and maintenance expenses contributed to the increase, while weaker selling prices made it harder to recover these costs. Q3 operating profit fell 14.85% despite a 28.29% rise in gross profit. One reason is that foreign exchange gains fell to NGN0.08bn from NGN5.98bn in Q3:2025. In Q3:2025, Presco recorded an administrative expense credit of NGN96.20mn, compared with an expense of NGN7.52bn in Q3:2026. This represents an adverse movement of NGN7.61bn YoY, which contributed to the decline in operating profit.
Lower Finance Costs Support PBT: Finance costs declined 34.45% to NGN19.65bn following debt repayments, while finance income increased to NGN13.96bn from NGN3.66bn, largely from fixed deposits. Together, these movements improved earnings by NGN20.63bn, more than offsetting the NGN8.81bn decline in operating profit. PBT consequently grew 8.47% to NGN151.48bn. However, tax expense rose 39.61% to NGN40.30bn, increasing the effective tax rate to 26.61% from 20.67% and leaving PAT almost unchanged at NGN111.18bn (+0.35%). Q3 PAT increased 31.76% largely because the tax charge fell to NGN0.36bn from NGN5.74bn, rather than stronger operating earnings. EPS declined 13.99% to NGN95.29 after the share count increased following the rights issue.
Debt Repayments Reduce Cash Holdings: Borrowings fell 56.79% to NGN137.12bn from NGN317.30bn at FY:2025 after NGN199.91bn of loan repayments. This has reduced interest costs and strengthened the balance sheet, although cash also declined to NGN135.17bn from NGN262.58bn as funds were used to repay debt. Operating cash flow fell 25.81% YoY to NGN97.34bn despite higher PBT. The cash-flow statement deducts NGN27.42bn of foreign-exchange gains that did not bring in cash, helping explain the difference. After interest payments of NGN33.65bn and capital expenditure of NGN13.69bn, cash remaining from operating activities declined by 40.89% YoY to NGN50.01bn, from NGN84.60bn in 9M:2025. Finished goods inventories rose to NGN18.09bn from NGN4.81bn at FY:2025. PRESCO normally builds stocks during the peak harvest, and selling these goods in Q4 should help release cash.
Expansion Must Deliver Higher Earnings: The investments in GOPDC and Saro have expanded PRESCO’s plantation base, but Ghana’s 21.57% revenue decline shows that a larger business does not immediately mean higher earnings. Management expects harvesting at Saro to begin in Q4:2026, with its contribution increasing as the plantations mature. The timing matters because the company has already committed substantial funds to acquisitions. Ghana’s new minimum purchase price for fresh fruit bunches may also raise processing costs where fruit is bought from farmers. In Nigeria, the lower import tariff increases competition, while new investment tax incentives may support qualifying expansion projects. We expect these investments to support long-term growth, but their success will depend on stronger earnings and disciplined spending.
OUTLOOK:We expect weaker domestic prices and high operating costs to keep margins under pressure, although stronger Q3 gross margins and sales of seasonal inventory should support Q4. Our FY:2026 forecast is revenue of NGN336.58bn (+1.80% YoY), operating profit of NGN181.75bn (-15.44%), PBT of NGN172.67bn (-2.99%) and PAT of NGN126.73bn (+4.43%). Lower finance costs and a lighter estimated tax charge should support PAT despite weaker operating earnings. Reflecting these developments and the stronger balance sheet, we revised our target price to NGN1,799.00, implying an upside potential of 8.58% from NGN1,656.80, and consequently maintain our NEUTRAL recommendation. Stronger Ghana sales and earlier contributions from Saro could lift our valuation; further price weakness, rising costs and slower cash generation remain the main downside risks. We will watch Q4 inventory sales and Saro’s first earnings contribution.
Please click here to download the full report.