Presco: sustaining momentum amidst rising cost of fertilisers, energy

With half-year profit at a 10-year high, Presco Plc has shown resilience in the first half (H1) of 2022 despite weak profit margins due to rising cost of fertilizers and energy, higher plant maintenance cost and high compensation.

The palm oil company’s profit grew by 33.10 percent in the first half of 2022 to N13.47 billion from N10.12 billion in the first half of 2021.

Its profit margin weakened by 15 basis points (bps) or 15 percent to 32.29 percent in the first half of 2022 from 47.16 percent in the first half of 2021.

The revenue reported by the company during the period, which is also the highest reported in 10 years amounted to N41.71 billion in the first half of 2022, growing by 94.36 percent from N21.46 billion in the first half of 2021.

Analysts from CSL Stockbrokers Limited attributed the growth to elevated CPO prices on the back of production shortfalls in Indonesia and Malaysia together with higher volumes.

Presco reported a 132.19 percent spike in the cost of sales to 11.47 billion in the first half of 22 from N4.94 billion in the corresponding period of 2021.

Its administrative expenses also experienced an uptick of N8.31 billion in the first half of 2022, growing by 187.5 percent from N2.89 billion in the first half of 2021.

The company’s net finance costs spiked to N3.87 billion, growing by 779.55 percent in the first half of 2022 from N440 million in the first half of 2021, driven by an all-time leveraged position, according to analysts at CSL Stockbrokers Limited.

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Its borrowings during the period amounted to N65.01 billion, growing by 482.5 percent from N11.16 billion in the first half of 2021.

Total assets reported by the company grew by 99.8 percent to N149.59 billion in the first half of 2022 from N74.87 billion in the first half of 2021.

Its shareholder’s equity rose by 5.05 percent to N43.26 billion in the first half of 2022 from N41.18 billion in the first half of 2021

The palm oil producer’s cash and cash equivalent improved by 2,156 percent to N17.37 billion in the first half of 2022 from N770.86 million in the first half of 2022.

Analysts at Coronation Research attributed the growth to proceeds from its bond issuance program.

However, the company reported negative net cash from operating activities of N2.51 billion, a 124.66 percent decline from N10.18 billion reported in the first half of 2021.

Its cash used in investing activities declined further from N-1.84 billion in the first half of 2022 to N-2.95 billion in the first half of 2022.

This was largely due to the acquisition of property, plants, and equipment during the period which amounted to N4.89 billion in the first half of 2022.

Its net cash generated from financing activities amounted to N6.13 billion in the first half of 2022 an increase from N-2.78 billion.

Presco Plc reported earnings per share of N1347 per share in the first half of 2022.

Presco is a fully-integrated agro-industrial establishment with oil palm plantations, palm oil mills, palm kernel crushing plants, and vegetable oil refining and fractionation plant. It also has an olein and stearin packaging plant and a biogas plant to treat its palm oil mill effluent. It specialises in the cultivation of oil palm and in the extraction, refining, and fractionation of crude palm oil into finished products.