Presco: Agriculture

THE COMPANY: Presco is a fully integrated agro-industrial establishment with oil palm plantations, a palm oil mill, palm kernel crushing plant and vegetable oil refining plants. It specialises in the cultivation and extraction of oil palm, and the refining and fractionation of crude palm oil (CPO) into finished products.

Presco has an integrated production process and this allows it to supply sphere fats and oils based on customers’ specifications. The company has commenced investments in the rubber sector, and has already established a bud wood garden and acquired approximately 14,000 ha of land for the rubber plantation. Presco was incorporated in Nigeria in September 1991 as Presco Industries, a private limited liability company, which later went public in February 2002.

2013 RESULTS: In the first quarter of 2013, Presco saw a decline in its revenue, which eased by 9.39% to N2.01bn ($12.66m) from the N2.21bn ($13.92m) recorded in the preceding year. A major factor that contributed to this decline was the cost of sales, which appreciated by 9.92% to N953.17m ($6m) from N867.45m ($5.46m) in Q1 2012.

Softer CPO prices in the global market also depressed performance, as CPO accounted for 43% of the company’s overall output, averaged over the last five years. The lower prices influenced the increase in inventories on the company statement, which rose 28.63% to N2.31bn ($14.09m) when compared to the N1.8bn ($10.98m) released in Q1 2012.

Gross profit for Q1 2013 stood at N1.05bn ($6.62m), while in Q1 2012 the figure was N1.35bn ($8.5m). Selling, general and administrative expenses declined by 21.19% in Q1 2013 to N279.41m ($1.76m). This decrease helped stimulate the growth of other operating income, which stood at N114.05m ($718,515) for Q1 2013, representing a 322.22% increase from the N27.20m ($171,360) declared in Q1 2012. In addition, the company reported zero distribution expenses and other operating expenses in both Q1 2012 and Q1 2013. Profit before tax slowed to N379.46m ($2.39m), declining 82.95%, and profit after tax dropped by 74.72% to N403.23m ($2.54m).

The company’s book value per share for Q1 2013 remained at N30.61 ($0.19), making the market value slightly overpriced at N32 ($0.20) per share. Annualised earnings per share was N1.61 ($0.010). The company’s stock has returned 129.4% year-to-date in the price performance; it also paid out a N1 ($0.0063) dividend to its shareholders during the year, which translated to a yield of 4.44% and a payout ratio of 11.65%. This shows that the company retained most of its profit to support new major expansion projects.

Net asset, which saw an 8.79% decline in fiscal year 2012, recovered by 1.74% in Q1 2013 to N17.39bn ($109.56m) from the N17.09bn ($107.67m) recorded the previous year. The liquidity and reserves of the company, which represents its cash and bank balances, rose to N1.53bn ($9.64m), while fixed assets saw marginal growth as they appreciated only slightly, by 0.3% to N8.56bn ($53.93m) from N8.54bn ($53.8m) in Q1 2012. The strong position sustained in the company’s balance sheet demonstrated its potential and strategy for sustainable growth and development.

DEVELOPMENT STRATEGY: In 2012 Presco acquired an additional 3200 ha of land at its Ologbo Estate, to complete the acquisition of over 14,000 ha at Orogho/Obagie Nunuamen in the Orhiomwon area of Edo State. However, despite a very challenging year in 2012 for the vegetable oil sub-sector of the Nigerian economy, particularly due to government’s policy on the importation of palm oil, the company was able to pursue its planned programmes for improving its processing capacity and expanding its plantations. Presco has also started investing in a pellet plant for the export of palm kernel cake, a bottling plant for the sale of oil to retail customers and a packaging plant. Due to these various strategies and investments, the company expects improved performance in its activities across the year, especially through the dynamic and creative strategy implemented by its marketing team.