Presco: Expanding Business Frontier to Enhance Shareholders’ Return
Kayode Tokede
Presco Plc in its unaudited 2021 financial statement for the period ended December 31, 2021 improved on profitability as the management expanded in the business frontier to enhance shareholders’ return.
The fully-integrated agro-industrial company in oil palm plantations, palm oil mill, palm kernel crushing plant and vegetable oil refining and fractionation plant over the years have demonstrated stronger growth in profit & loss figures and financial position to retained its spot as one of the most fundamental stocks on the Nigerian Exchange Limited (NGX).
Given its expansion, Presco borrowing to finance key agro-industrial projects have contributed to revenue, profit and dividend payout to shareholders.
Take for instance, Presco reported N31.39 billion total borrowing in 2021 from N13.24 billion in 2020 audited financial statement and closed the same year with profit after tax of N18.9 billion in 2021, an increase of 259 per cent from N5.26 billion reported in 2020.
The company had declared an interim dividend of N1.00 per 50kobo ordinary share and expected to announce final dividend once audited 2021 financial statement released to the general public on or before April 30, 2022.
In 2020 financial statement, it paid shareholders N2 billion in dividend, while interim dividend paid for the year was N1 billion.
Fixed Rate Bonds
Amid efforts to meet fat and oils demand and robust dividend payout to shareholders, the company announced successful issuance of N34.5 billion Series 1 seven-year Fixed Rate Bonds under its N50 billion bond Issuance Programme.
The strategic move by Presco is aimed to drive sustained long-term growth and profitability of the company.
According to the company, the bond issue was 247per cent subscribed and priced at a coupon rate of 12.85 per cent.
This is Presco’s debut bond issuance in the Nigerian debt capital markets and the Bond Issue attracted participation from a wide range of investors including pension funds, asset managers, insurance companies, banks and high net worth individuals.
Presco sought out to raise N30 billion but the order book closed at N74 billion, so the Company elected to issue an additional 15per cent to investors thus raising a total of N34.5 billion.
This is on the backdrop of the company’s recent deal of seeking to take full ownership of its competitor Siat Nigeria Limited (SNL), a subsidiary of Belgian group Siat SA.
The transaction will concern all the shares of SNL held by Siat SA amounting to 7,330,965,143 for a unit price of N2.86 for a total cash consideration of N21 billion or $50million.
SNL was incorporated in 1991, as a wholly owned subsidiary of Siat SA and according to 2021 unaudited financial statement, Siat SA is actively traded on the NGX with a holding of 60 per cent and the Nigerian public holding the remaining 40 per cent. In 2011, the company acquired the assets of Risonpalm, which comprised 16,000 hectares of old palm plantations, as well as the entire social and industrial infrastructure of the industrial oil palm complex from the Rivers State Government.
Following the acquisition, Presco intended to gain in scope both upstream and downstream of the palm oil production chain to strengthen its presence on the Nigerian market, which is the largest on the African continent.
Newly acquired subsidiary
The company in a statement said,“ The Directors have made an assessment concerning the consolidation of the newly acquired subsidary, SIAT Nigeria Limited (SNL) and noted that some more time will be needed to come through with the consolidation of the subsidary with the financial statements of Presco.“
At the moment, Presco has a mill capacity of 90 tons per hour and a 500 ton per day vegetable oil refinery, while SNL has a 60 ton mill which combined will increase the benefit of value added.
Currently, SNL operates from two estates in Rivers State, the Ubima Estate and the Elele Estate and over the last five years, has invested N6billion in developing its operational capacity.
Presco’s share price appreciated by 27.88per cent in March 2022, enjoying investors’ positive sentiment as it rose from N104.00 to N133.00 at the end of March. The company grew its capitalization from N104.00 billion to N133.00 billion.
Sustained profit growth
In its unaudited 2021 results, Presco announced about 98 per cent increase in revenue to N47.23biillion from N23,89billion reported in 2020.
Cost of sales moved from N7.8billion to N15.99billion to position gross profit at N31.24 billion, a growth of 94per cent from N16.09billion reported in 2020. Consequently, gross profit. revenue moved from 67.34 per cent in 2020 to 66.14 per cent in 2020.
The company’s total operating expenses gained 29.7 per cent to N9.25billion in 2021 from N7.13billion in 2020.
The breakdown of total operating expense showed 26.16 per cent growth in administrative expenses to N8.6billon in 2021 from N6.82billion in 2020, while selling & distribution expenses moved from N318.4million in 2020 to N650.4million in 2021.
From the profit & loss figures, Presco reported 44 per cent increase in gain on biological asset revaluation to N2.66billion from N1.85billion reported in 2020.
In the 2021 unaudited statement, Presco reported finance cost of N617.6million, a decline of 68 per cent from N1.92billion reported in 2020 as finance income also dropped by 92 per cent to N617.58million in 2021 from N1.92billion in 2020.
The interplay between finance income and cost lifted profit before tax to N23.75billion in 2021 from N8.69billion in 2020.
Strong balance sheet position
Presco’s total assets grew by 67 per cent from N73.77 billion in 2020 to N122.89 billion in 2020. The long-term assets rose to N77.9billion in 2021, 45per cent high from N53.73 billion reported in 2020 while current asset gained 124.38 per cent to N44.96 billion as against N20.03billion recorded in 2020 financial year.
Total liabilities increased by 77.8 per cent to N75.97 billion in 2021 from N42.72 billion in 2020. Presco’s long-term liabilities dropped by 0.6 per cent from N17.45 billion to N17.35 billion while current liabilities increased by 132.09 per cent to N58.63billion from N25.3 billion in audited 2020 results.
The agro-industrial total equity increased 51.1 per cent to N46.92 billion in 2021 as against N31.05 billion reported in 2020.
The proportion of equity funds to total assets, however, dipped from 42.09 per cent to 38.18 per cent in 2021 while total liabilities/Total Assets moved to 61.8 per cent from 57.91 per cent in 2020.
Booting Investors Contidence
The Managing Director of Presco, Mr Felix Nwabuko, during the bond issue signing ceremony in Benin, commended institutional investors for supporting the transaction, adding that it was 24 per cent subscribed and priced at a coupon rate of 12.85 per cent.
He said, “Presco sought out to raise N30 billion but the order book closed at N74 billion, so the company elected to issue an additional 15 per cent to investors thus raising a total of N34.5 billion.
“Stanbic IBTC Capital Ltd acted as Lead Issuing House to the bond issue, while CardinalStone Partners Ltd and Quantum Zenith Capital and Investments Ltd acted as joint issuing houses to the bond issue.
“We are pleased by the success of our debut bond issue and grateful to our institutional investor community for supporting the transaction. This is a landmark transaction for Presco and it has broadened our sources of long term funding.
“The success of this transaction evidences the resilience of our business, its strong cash generation and a long term future with enormous potential for sustainable growth, in a pivotal sector for the country’s agri-food promotion strategy, made possible by our market-leading position in Nigeria, Africa’s largest market for palm oil products. This is supported by our A+ rating by Agusto & Co and A- rating from GCR.”
Also speaking, Funso Akere, Chief Executive of Stanbic IBTC Capital, said: “Stanbic IBTC Capital, CardinalStone Partners and Quantum Zenith Capital are delighted to have advised Presco on its debut issuance in the Nigerian debt capital markets.
“We thank the institutional investor community for supporting the Issue, as its success should encourage other similar companies to access the domestic debt capital markets for their strategic funding needs.
“We also thank the Board and management of Presco for giving the Issuing Houses a free hand to guide the process.”
Managing Director/Chief Chief Exective Officer, Quantum Zenith Capital, Kennedy Ichibor and Michael Nzewi of Cardinal Stone, commended Presco Plc for creating conducive atmosphere for the transaction and for keeping the company on the path of growth over the years. Stanbic IBTC Capital Limited acted as Lead Issuing House to the Bond Issue, while CardinalStone Partners Limited and Quantum Zenith Capital and Investments Limited acted as Joint Issuing Houses to the Bond Issue.