…But faces turnover slow-down QoQ

By Emeka Anaeto, Economy Editor

INVESTORS have stepped up bullish sentiment on shares of PRESCO Nigeria Plc on account of the company’s recent impressive 9-months to September 2016 (9-m’16) financial results.

Shortly after the result was announced on the floor of the Nigerian Stock Exchange, NSE, three weeks ago capital gains began further upswings leading to one of the best Year-to-Date, YtD, returns in the NSE at 45 per cent as at yesterday, up from 28.2 per cent before the result.

The result had beaten most consensus estimates by huge margin especially in profitability, and consequently, the huge jump in Earnings Per Share, EPS, to N6.8, from N3.46 a year ago.

PRESCO’s 9-m’16 earnings showed strong year-on-year, YoY, growth across topline and bottomline. Turnover for the period increased by 48 per cent YoY to  N11.9 billion, though this showed a slow-down in growth rate quarter-on-quarter, QoQ, as third quarter was a modest 2.0 per cent growth as against 32 per cent and 36 per cent recorded in the second quarter and first quarter of 2016 respectively.

However, 9-m’16 gross margin expanded by 75 per cent as against 65 per cent YoY as cost of sales rose at a much slower pace relative to topline growth.

The combination of robust margin with  98 per cent YoY increase in gains in biological assets lifted Presco’s 9-m’16 after-tax earnings  to  N6.8 billion.

Industry observers have noted that the export of Crude Palm kernel Oil (CPO) to Europe by Presco which was aimed at generating dollar revenue is beginning to pay off. The CPO  export, according to them, has bolstered top lines as well as increased gains on revaluation of biological assets underpinning   profitability rise.

The company’s bottom lines got a tremendous boost from a 97.31 percent upsurge in gains from changes in fair value of biological assets to N4.4 billion.

Industry analysts are of the view that the ban on importers from accessing dollars for certain products was a windfall on the country’s largest palm oil producer as it fuelled local demand for domestic goods and help slow competition.

According to analysts at FBN Merchant Bank, “Presco recently commenced export of crude palm kernel oil. As such, we expect a further boost to topline growth in second half of 2016, in addition to market share gains on the back of competition (importers) struggling to obtain foreign exchange.”

Central Bank of Nigeria, CBN, had banned the importation of 41 items including palm oil from its official window in attempt to curb inflation and protect the external reserves hard hit due to a sharp fall in the price of crude oil.