Monday, April 16, 2018

Presco: Another year of outstanding earnings leap

Presco: Another year of outstanding earnings leap
May 17
20:32 2017

Presco, the oil palm producing company, is experiencing another year of galloping growth in revenue and profit that has lifted the company into the top range of listed companies by earnings per share. Last year, the company registered an explosive profit high jump that established profit well above sales revenue. It multiplied after tax profit close to nine times to about N22 billion at the end of the year – a record unmatched anywhere else across stock market sectors and industries.

The company is again lifting earnings figures well ahead of the 2016 numbers, indicating the high prospects for another exceptional profit growth in 2017. Gain on biological assets revaluation provided the bulk of the profit last year and further revaluation gains are again occurring in the current year. Besides that, a strong revenue growth recorded last year is being maintained this year.

Sales revenue amounted to N7.17 billion for Presco at the end of the first quarter, a year-on-year growth of over 125%. This is a far stronger revenue growth record than the break out performance the company saw in 2016. Turnover has been generally stagnant for the company for several years until a 50% leap last year broke the sluggish trend of the preceding years.

The first quarter revenue growth rate isn’t likely to be maintained to full year due to uneven performance across quarters. Turnover is projected to stand in the region of N22 billion for Presco at the end of the year. That will be a growth of 40% over the preceding year’s figure, up on the 50% rise in 2016. Revenue growth normally slows down in the second half, which is the company’s off season, indicating that actual revenue may differ significantly with the projected.

After tax profit amounted to N3.90 billion at the end of the first quarter, an increase of 179% year-on-year. Profit growth is likely to slow down in the second half and the high growth seen in the first quarter isn’t likely to be maintained to full year. However biological asset revaluation gain, which could expand rapidly from N634 million in the first quarter, could accelerate profit growth in the coming quarters. In the circumstance, the full year profit expectation cannot be reasonably projected for now.

Costs are generally under control, which has improved profit capacity so far. Cost of sales moderated at an increase of 23% at the end of the first quarter. That has lifted gross profit by 186% to N5.72 billion over the review period. Gross profit margin has improved from 63% in the same period last year to about 80% in the first quarter of the current financial year.

All other expense lines, including interest expenses also moderated during the period, leading to a 167% advance in operating profit and a 180% leap in pre-tax profit. Net profit margin improved from 44% to over 54% over the period – one of the biggest profit capacities among listed companies.

The company earned N3.90 per share at the end of the first quarter compared to N1.40 in the same period last year. It earned N22 per share at the end of 2016 and has announced a cash dividend of N1.50 per share for last year’s operations. The closure of register and payment schedules were yet to be announced at press time.


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