Presco Plc has posted 24.39 per cent drop in profit after tax for the half year ended June 2019.
According to a report obtained from the Nigerian Stock Exchange (NSE), the unaudited financial result for the first half showed profit after tax of N3.016 billion from N3.989 billion recorded in 2018, accounting for a drop of 24.39 per cent.
Profit before tax stood at N3.882 billion in 2019 from N5718 billion a year earlier, representing a decline of 32.1 per cent.
Revenue equally declined to N10.548 billion during the period under review from N11.658 billion in 2018, amounting to a decrease of 9.52 per cent.
Reacting to the results, analysts at Investment-One Research said: “We believe the decline in revenue may not be unconnected to the decline in CPO prices which have been under pressure due to lingering trade tension between US and China. With a marginal fall in revenue, we suspect higher volume sales could have reduced the impact of the fall in price level on revenue. Similarly, the company’s gross profit margin declined to 74.00 per cent in Q2 2019 from 84.13 per cent in Q2 2018 on the back of the weak price level.”
They noted that in the first half of the year, turnover remained under pressure due to lower crude palm oil price.
“As such, revenue shed 9.52 per cent to N10.55billion in H1 2019. Similarly, gross profit margin declined by 82bpsy/y to 79.78 per cent during the same period. In the same vein, the jumped in OPEX/ Sales by 682bps and a 65.47 per cent rise in net finance cost drove the PBT margin down to 46.01 per cent in H1 2019 from 49.05 per cent in H1 2018. Similarly, PBT fell by 32.10 per cent y/y to N3.88billion in H1 2019. The results were headlined by lower pricing, which weighed on margins and earnings.
“Going forward, we expect the company to continue to benefit from the government’s exclusion of importers of crude palm oil from the official foreign exchange market, which has been a barrier to importation of crude palm oil thus preserving the market for local big players like Okomu and Presco.
“In the same vein, we expect the company’s 15,000 hectares expansion project to continue to support its top line growth within the medium to long term. The company did plantation on 4,000hectares in 2018 and intends to do plantation on another 4,000 hectares in 2019. In the same vein, the expected improvement in consumer spending in H2 2019, could improve demand for crude palm oil particular for the production of other consumer goods.
“Nonetheless, the current decline in price of crude palm oil may continue to weigh on gross profit margin and turnover growth in the near term. Similarly, the volatility in revaluation gain on biological assets is a concern considering the impact it could have on the company’s PBT performance,” they said.