PRESCO published its Q4-21unaudited financials on Sunday (30 January), reporting standalone EPS of NGN5.09 in Q4-21 (Q4-20: NGN0.26), underpinned by impressive revenue growth and lower net finance costs. For 2021FY, the EPS came in at NGN18.87 (2020FY: NGN5.26), recording a substantial increase of 258.6%.
PRESCO’s revenue in Q4-21 (+161.2% y/y to NGN12.99 billion) was driven by (1) the recovery in CPO demand coming off the pandemic-induced dip in 2020, and (2) a higher CPO price (Average CPO price: USD1,347.77/mt in Q4-21 vs USD853.92/mt in Q4-20) facilitated by production shortfalls in Indonesia and Malaysia (c.85.0% of world CPO supply). Sequentially, on a q/q basis, turnover grew marginally by 1.7%.
Gross margin (-911bps) declined to 59.3% in Q4-21 (Q4-20: 68.5%) as cost of sales (+236.6% y/y) grew faster than revenue. We suspect that higher diesel prices must have resulted in higher energy costs, which constitutes the bulk of PRESCO’s total costs. Consequently, EBIT margin declined by 793bps to 48.0% (Q4-20: 55.8%), further dragged by a 50.9% y/y increase in operating expenses.
PRESCO’s net finance charges declined significantly by 89.6% y/y to NGN72.53 million (vs NGN696.51 million in Q4-20), driven by a lower overdraft balance. The result shows a 64.3% decrease in the company’s overdraft facility to NGN2.27 billion in FY-21 (vs NGN6.36 billion in FY-20).
Overall, PRESCO’s PBT increased by 187.9% y/y to NGN6.17 billion in Q4-21 (Q3-20: NGN2.14 billion). A tax expense of NGN1.07 billion resulted in a PAT of NGN5.09 billion in the period (Q4-20: NGN261.01 million).
Comment: PRESCO’s performance is impressive, as it is in tandem with our expectations following the improved demand for CPO and higher CPO prices. For the year ahead, we highlight that the upsides favouring Nigerian CPO planters such as tight border controls, FX liquidity challenges and the attendant impact on importers, and government support remain existent and should benefit PRESCO’s earnings. Thus, we expect a similar performance in Q1-22. We await the release of the audited results for a dividend declaration. Our estimates are under review.
Source Cordros Report
