Presco Plc performance in the fourth quarter of 2016 for the period ended 31 December reflects impact of harsh operating environment and the persisting forex exchange challenge.
A cross section of experts say that though the company performed beyond some analyst’s expectations in some key indices, irrespective of biting impact of macroeconomic environment.
The Nigerian harsh operating environment, the experts maintained, weighed heavily on Presco Nigeria Plc in the fourth quarter result, although the company posted 57 per cent growth in sales, operating expenses soared by 177 per cent in the fourth quarter (q/q) or 48 per cent year on year.
The biting effect of the challenges further reflected in other measuring indices including gross margin which declined by 61.4 per cent during the year (y/y), compared with the preceding year 2015, as well as net finance growth which rose by 107 per cent year on year.
The company’s Q4 2016 results further show that although sales growth was strong, a gross margin contraction of -1,873bps y/y to 61.4 per cent and opex growth of 48.2 per cent y/y weighed on earnings.
However, on quarter and quarter basis (sequentially), sales declined in Q4 2016 by -14.5 per cent, compared with Q3 2016 performance. Historically, Q4 is noted as one of the weaker quarters for palm oil companies due to seasonality.
In Q4, Profit before tax (PBT) and Profit after tax (PAT) advanced by around 290 per cent q/q on average. The result further showed that similar to the y/y trend, gross margin in Q4 contracted by -466bps q/q while operating expenses (Opex) and net finance costs rose by 177 per cent q/q and 119 per cent q/q respectively, compared to its Q3 performance, this weighed on Okomu Oil’s bottom line.
Meanwhile, on full year assessment basis, Okomu Oil’s sales rose by 50.4per cent y/y to N15.7billion. PBT rose by 641% y/y to N31.2 billion, while PAT also rose by 772 per cent y/y to N21.7bn. In addition to the strong sales growth, gross margin expanded by 847bps y/y to 72.0 per cent. Also in 2016, Okomu reported 46.6 per cent y/y opex growth which weighed heavily on earnings.
FBNQuest Research report on Okomu Oil Q4 result rated high the performance and raised its rating on the agro and allied based company from neutral to slightly positive.