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Tag: Presco

  • Analysts pick Presco, Okomu for high returns

    Nigerian oil palm industry is poised for a boom and  two quoted palm oil companies, Presco Plc and Okomu Oil Palm Plc, have prospects to deliver considerable cash dividends and share price appreciation in the years ahead.

    In its report on the Nigerian oil palm industry, Afrinvest (West Africa) Limited said the Nigerian oil palm industry will witness continued growth in the years ahead with positive earnings and profitability of listed companies to improve at a faster pace over the forecast period.

    The 42-page report concluded that Presco and Okomu Oil Palm are expected to record significant price growth and capital appreciation in the years ahead, while providing annual dividend income for investors.

    The report noted that the two quoted companies have focused on expanding production, especially over the last three years by investing in increasing total land area under cultivation, expanding milling and refining facilities to meet up with expected additional output.

    “We hence expect both companies to record continuous revenue and profitability growth over our forecast period,” Afrinvest said.

    The oil palm industry, the report said,  is keenly positioned to soar further over the coming years as investments in expanding milling and refining capacity of listed sector players crystallise. Also, the sector, which has ridden on positive government support since 2015, based on oil palm import restrictions introduced by the Central Bank (CBN), has provided premium pricing opportunity for players. Similarly, the Federal Government posture towards supporting agriculture has enabled low cost capital expenditure financing by industry participants compared with other sectors in Nigeria.

    At Okomu Oil Palm, the report listed the growth factors to include enlarged plantation with oil palm and rubber trees on about 8,809 hectares and 1,989 hectares to mature within the forecast period expansion in milling capacity first from 60.0 FFB MT per hour in 2017 to 75.0 FFB MT per hour in 2019 and to 90.0 FFB MT per hour by 2021.

    Also, the management of Okomu Oil Palm has confirmed that ongoing investment in Extension II plantation will see a further increase in milling capacity to 120.0 FFB MT per hour hour in FY:2020 and to 150.0 FFB MT per hour by 2022.

    The report pointed out that the ongoing growth initiatives and favourable operating environment suggest strong growth in Okomu Oil Palm revenues and overall profitability as cost containment strategy continually delivers slow pace of expansion in costs of sale and operating expenses.

    According to the report, the business connectivity to Benin Electricity Distribution Company (BEDC) has led to significant moderation in Okomu Oil Palm’s operating expenses while its plan to power its plantations’ plants and factories through a steam turbine fed by empty fruit brunches (EFB) would support cost moderation.

    “PRESCO, which has chosen to specialise in the production of speciality fats and oil, RBD and PFAD, enjoys premium pricing on its products. We opine that the company’s profitability has been constrained by the weak capacity of its refinery and fractionalisation plant, which has a capacity of only 100.0 CPO MT/day. Our discussion with management revealed that expansion in the capacity of this plant to 500.0 MT/day would be completed in fourth quarter 2019 and hence presents an upsurge in output and company’s profitability above sector comparable,” Afrinvest stated.

    Presco is also expected to see oil palm trees on about 7,100 hectares, maturing within the forecast period to support the expanded refining capacity. Management of Presco said the sales of CPO will moderate to focus more extensively on sales of RBD and PFAD.

    “For the industry, we opine that there are attractive opportunities presented by current supply deficit within the sector and growing demand suggested by Nigeria’s rising population. We suggest that investors positioning in currently listed companies will offer an opportunity to earn impressive capital appreciation as well as consistent dividend payments.

    “Also, we believe that the industry is accommodative for additional listings by other smaller companies – Real Oil Mills Limited (owned by Flourmills Plc), Grand Cereal & Oil Mills Limited, Poko Oil Mills Limited, PZ Wilmar Limited and BUO Oil Mills (owned by BUA Group) – as well as stable and supportive for long term investments by new companies seeking superior return on investment,” Afrinvest said.

     

     

     

  • Presco eyes sustained growth with long-term expansion plan

    Chairman, Presco Plc, Pierre Vandebeeck said the agro-industrial company, Presco remains committed to its bold and long-term expansion programmes which would drive import substitution, foreign exchange earnings and ownership of green energy generation.

    In his latest address to shareholders, Vendebeeck  said that the company, which was awarded the Corporate Social Responsibility Award for 2016/2017 would achieve sustainable long-term growth by increasing its oil palm plantation with an additional 4,000 hectares; planting its first rubber trees and completing its RSPO certification.

    “We have kept our pledge that we will in 2016, concentrate on efficiencies in the management operations across our value chain and continue with our planned long term expansion programmes. This will continue in 2017 as we embark on bold expansion programmes that fall into three broad categories, viz import substitution, forex earnings and own green energy generation. We aim to increase our oil palm plantation hecterage by the planting of an additional 4,000 hectares, plant our first rubber trees. and pursue completion of our RSPO certification,” Vendebeeck said.

    He also said the company has expended about N 148.3 million and N101.4 million in 2015 and 2016 on developmental researches which in turn have increased the quality of FFB and oil per hectare of plantation.

    According to him, the company is committed to research and development as it is at the forefront of new planting material development while it has been very successful in increasing the quality FFB and Oil per hectare of plantation.

    He noted that Presco has collaborations with first class research organisations and national and international universities, pointing out that every year, its research activities are increasingly bringing Presco to its ambition of establishing itself as a centre of excellence for oil palm cultivation and research in the West Africa region.

  • Presco posts N2.3bn profit

    Management of Presco PLC has announced a profit of N2.3bn after tax for the year ending 2015.

    Also, shareholders of the company approved the sharing of 100 kobo per share which amounts to N1bn, subject to withholding tax at the appropriate rate.

    Chairman of Presco PLC, Mr. Pierre Vandebeeck, who announced this at the company’s 23rd Annual General Meeting (AGM) disclosed this while presenting the 2015 company’s financial report.

    Vandebeeck said the company’s turnover for the year 2015 was N10.448bn as against N9.138bn recorded in the previous year.

    The Presco boss stated that the resilience and robustness of the Nigerian economy makes it the destination of choice for investors despite increased challenges experienced by the business environment in 2015.

    He stated that the company’s newest project tagged “Sakponba Project” would create at least additional 2500 jobs for the unemployed.

    He said the “Sakponba Project” would make the company the biggest palm and rubber industry in Nigeria and West Africa as well as helped to developing Nigeria’s economy.

    His words, “The performance of the year 2015 is very good. We achieved a fresh fruit production of 176,477 tons.

    “We are sailing in the right direction, making progress in all facet of our business and continually pushing forward in all fronts to sustain and further enhance our leadership position in our industry.

    “2016 will see further expansion in our oil palm plantation hectarage, additional investments in processing facilities and support infrastructure and commencement of development in the 14,000 hectare new project site in Orhionmwon.”

    Speaking on behalf of the company’s shareholders, Bishop Goodluck Akpore praised the management for their magnanimity towards shareholders and called on government to invest in the company.

    Bishop Akpore said the company which has employed over 3500 workers in the country has helped to strengthen the economy and also assisted Nigerians who are willing to invest in farming.

  • Debt: Presco seeks N3b from core investor, others

    Presco Plc, a palm oil plantation and processing company, has commenced the process to raise some N3 billion new equity funds from its major core investor and other minority shareholders.

    The new equity funds will be used  to reorganize Presco’s highly leveraged capital structure.

    Latest audit of Presco showed that it has outstanding foreign loan of N2.02 billion obtained from its majority shareholder, Siat sa. Besides, the company also obtained N1.07 billion loan from Stanbic IBTC Holdings under the Central Bank of Nigeria (CBN)’s Power and Airline Intervention Fund (PAIF). It also has about N221.9 million outstanding as import finance facility from Zenith Bank and another N845.55 million from United Bank for Africa (UBA) under the CBN’s Commercial Agriculture Credit Scheme (CACS). Bank overdraft has jumped by 1,015 per cent from N63.06 million in previous audit to N702.9 million in the latest audit.

    Presco’s interest expense on overdrafts also leapt by 608 per cent from N28.4 million to N201.4 million. Interest expense on overdraft represented about 52 per cent of the total interest expense of N390.4 million in the latest audit. The audited report and accounts for the year ended December 31, 2013 showed that net profit dropped by 62 per cent, which partly accounted for 90 per cent slash in cash dividend to shareholders.

    The management of the palm-oil plantation and processing company said the process of the new rights issue has started, implying that the company might open the application for issue before the end of the year.

    The shareholders of the company had in July this year approved the supplementary share issuance at their annual general meeting in Benin, Edo State. At the annual general meeting, shareholders had also approved the increase in the authorised share capital of the company from N500 million to N550 million through the creation of 100 million ordinary shares of 50 kobo each.

    Managing director, Presco Plc, Mr. Uday Pilani, confirmed the commencement of the rights issue noting that the board had decided to undertake the new equity raising to give the company financial flexibility and reorganise its capital structure.

    According to him, the net proceeds of the rights issue will be used to reduce the company’s debt and foreign exchange exposure.

    Directors of the company said they expected the rights issue to receive overwhelming support as it presents an excellent opportunity for existing shareholders to increase their investment in the company, which has consistently recorded impressive results and also paid dividends to its shareholders over the years.

    Sa Siat nv, which holds 60 per cent majority equity stake in Presco, will provide nearly two-thirds of the rights funds. First Inland Bank/Fidelity Finance Company (TRDG), which holds 8.0 per cent equity stake, is expected to provide the second largest chunk of the funds. Presco has some 9,415 shareholders with the largest group of shareholders holding small units within the range of 1000 to 10,000 shares.

    An investment banking source in the know said the company has secured the endorsement of the core investor and major shareholders for the rights issue, a general reference that they will be willing to pick up their rights.

    While the current details of the rights issue are sketchy, initial check by The Nation indicated that the rights issue will be pre-allotted to shareholders on the register of the company as at July 4, 2014 on the basis of one new share for every 10 shares held as at the qualification date. Directors of the company had also earlier indicated the rights would be offered at N35 per share. However, the share price of Presco opened yesterday at the Nigerian Stock Exchange (NSE) at N30.45 per share after it dropped by 4.99 per cent in the first trading session of the week. It had lost 9.72 per cent last week.

    Initial outlined had indicated that in the event of under-subscription of the rights issue, shareholders will not have any pre-emptive right, paving the way for other investors to acquire the unsubscribed shares. The underwriter to the rights issue will be able to acquire the unsubscribed shares, subject to the approval of the regulatory authorities.

    The additional capital, according to shareholders’ resolutions, would be used to eliminate the loans with foreign exchange exposure risk, accrued interest on these loans and overdraft.

    The company has struggled with declines in sales and profit in 2013. The steep decline led to 90 per cent reduction in cash dividend. While the company had distributed N1 billion annually as cash dividends for the 2011 and 2012, the company is distributing N100 million payout for the 2013 business year.

    While shareholders had received a dividend per share of N1 in 2011 and 2012, they will now receive a dividend per share of 10 kobo.

    The decline in dividend payout partly reflected the downturn in the operations of the company. Key extracts of the audited report and accounts for the year ended December 31, 2013 showed that net profit dropped by 62 per cent from N3.49 billion to N1.34 billion. Profit before tax had dwindled from N3.88 billion to N2.33 billion. Operating profit declined from N4.19 billion to N2.72 billion. Gross profit slumped to N4.62 billion in 2013 as against N5.24 billion in 2012. Aggregate turnover dropped to N8.49 billion in 2013 compared with N11.25 billion recorded in 2012.

    Chairman, Presco Plc, Mr. Pierre Vandebeeck, however blamed the decline on the provisions of the International Financial Reporting Standard (IFRS) and slowdown in the operating environment.

    According to him, the company used the IFRS in the 2013 audited report, which required revaluation of biological assets on the basis of international price of assets as at the year-end. While there were no decline in the price of oils in Nigeria by the year-end, there was a decrease in the world market price of biological assets and oils, which led to a revaluation loss of about N1 billion.

    Presco primarily engages in the development of oil palm plantations, palm oil milling, palm kernel processing and vegetable oil refining. The main products of the company included refined bleached and deodorised palm oil, palm olein, palm stearin, palm fatty acid distillate, palm kernel oil (crude and refined) and palm kernel cake.

  • Global commodity resurgence boosts Presco’s profit

    Presco Plc gained more than N1 billion from improvement in global commodity prices to boost its first-half profit by 84 per cent.

    A management report on the operations of the company for the six-month period ended June 30, 2014 indicated that the palm oil-plantation and processing company recorded a gain of N1.29 billion from revaluation of its biological assets in line with the global commodity prices for the period. It had recorded a paltry N37.48 million as gains on similar revaluation in the first half of 2013.

    The revaluation by the end of the first half restored the company’s margin, which was earlier depressed by relatively higher cost of sales.

    The International Financial Reporting Standard (IaFRS) requires commodity-based companies such as Presco to revalue their biological assets on the basis of the international price of the assets as at the end of the reporting period.

    Chairman, Presco Plc, Mr. Pierre Vandebeeck, had blamed similar revaluation at the end of the audited year ended December 31, 2013 for the steep decline in the performance of the company in 2013.

    According to him, while there were no decline in the price of oils in Nigeria by the year-end, there was a decrease in the world market price of biological assets and oils, which led to a revaluation loss of about N1 billion.

    The first-half report gained from the positive change in the global commodity prices. The six-month report showed that sales rose marginally by 3.6 per cent from N3.92 billion in first half of 2013 to N4.06 billion in first half of 2014. Gross profit however dropped from N1.37 billion to N1.27 billion. The revaluation gain of N1.29 billion in first half of 2014 meanwhile boosted operating profit to N1.84 billion compared with N995.91 million in corresponding period of 2013. Profit before tax thus increased from N791.68 million to N1.69 billion. After taxes, net profit stood at N1.09 billion by June 2014 as against N591.83 million by June 2013. This implied earnings per share of N1.09 in first half 2014 as against 55 kobo in first half of 2013.

    Presco primarily engages in the development of oil palm plantations, palm oil milling, palm kernel processing and vegetable oil refining. The main products of the company included refined bleached and deodorized palm oil, palm olein, palm stearin, palm fatty acid distillate, palm kernel oil (crude and refined) and palm kernel cake.

    Presco is expected to leverage on its first half results to encourage shareholders to support its impending rights issue.

    The company might raise about N3.5 billion from existing shareholders through a rights issue. At the annual general meeting last month, shareholders had approved the increase in the authorised share capital of the company from N500 million to N550 million through the creation of 100 million ordinary shares of 50 kobo each.

    The rights issue will be pre-allotted to shareholders on the register of the company as at July 4, 2014 on the basis of one new share for every 10 shares held as at the qualification date. Directors of the company had earlier indicated the rights would be offered at N35 per share.

    However, in the event of under-subscription of the rights issue, shareholders will not have any pre-emptive right, paving the way for other investors to acquire the unsubscribed shares. The underwriter to the rights issue will be able to acquire the unsubscribed shares, subject to the approval of the regulatory authorities.

    Presco will use the net proceeds of its equity issue to offset foreign loans and growing overdraft. Latest audit of Presco showed that it has outstanding foreign loan of N2.02 billion obtained from its majority shareholder, Siat sa. Besides, the company also obtained N1.07 billion loan from Stanbic IBTC Holdings under the Central Bank of Nigeria (CBN)’s Power and Airline Intervention Fund (PAIF). It also has about N221.9 million outstanding as import finance facility from Zenith Bank and another N845.55 million from United Bank for Africa (UBA) under the CBN’s Commercial Agriculture Credit Scheme (CACS). Bank overdraft has jumped by 1,015 per cent from N63.06 million in previous audit to N702.9 million in the latest audit.

    Presco’s interest expense on overdrafts also leapt by 608 per cent from N28.4 million in 2012 to N201.4 million in 2013. Interest expense on overdraft represented about 52 per cent of the total interest expense of N390.4 million in the latest audit. The audited report and accounts for the year ended December 31, 2013 showed that net profit dropped by 62 per cent, which partly accounted for 90 per cent slash in cash dividend to shareholders.

    The additional capital, according to the resolutions, would be used to eliminate the loans with foreign exchange exposure risk, accrued interest on these loans and overdraft.

    Sa Siat nv, which holds 60 per cent majority equity stake in Presco, will provide nearly two-thirds of the rights funds. First Inland Bank/Fidelity Finance Company (TRDG), which holds 8.0 per cent equity stake, is expected to provide the second largest chunk of the funds. Presco has some 9,415 shareholders with the largest group of shareholders holding small units within the range of 1000 to 10,000 shares.

  • Presco seeks new equity fund to offset foreign loan, overdraft

    Presco will use the net proceeds of its equity issue to offset foreign loans and growing overdraft as the palm oil-plantation and processing company seeks to rebuild its growth momentum after a major slump in 2013.

    Latest audit of Presco showed that it has outstanding foreign loan of N2.02 billion obtained from its majority shareholder, Siat sa. Besides, the company also obtained N1.07 billion loan from Stanbic IBTC Holdings under the Central Bank of Nigeria (CBN)’s Power and Airline Intervention Fund (PAIF). It also has about N221.9 million outstanding as import finance facility from Zenith Bank and another N845.55 million from United Bank for Africa (UBA) under the CBN’s Commercial Agriculture Credit Scheme (CACS). Bank overdraft has jumped by 1,015 per cent from N63.06 million in previous audit to N702.9 million in the latest audit.

    Presco’s interest expense on overdrafts also leapt by 608 per cent from N28.4 million to N201.4 million. Interest expense on overdraft represented about 52 per cent of the total interest expense of N390.4 million in the latest audit. The audited report and accounts for the year ended December 31, 2013 showed that net profit dropped by 62 per cent, which partly accounted for 90 per cent slash in cash dividend to shareholders.

    The outline on the new equity issue indicated that the company might raise about N3.5 billion from existing shareholders through a rights issue. At the annual general meeting yesterday, shareholders approved the increase in the authorised share capital of the company from N500 million to N550 million through the creation of 100 million ordinary shares of 50 kobo each.

    The rights issue will be pre-allotted to shareholders on the register of the company as at July 4, 2014 on the basis of one new share for every 10 shares held as at the qualification date. Directors of the company had earlier indicated the rights would be offered at N35 per share.

    However, in the event of under-subscription of the rights issue, shareholders will not have any pre-emptive right, paving the way for other investors to acquire the unsubscribed shares. The underwriter to the rights issue will be able to acquire the unsubscribed shares, subject to the approval of the regulatory authorities.

    The additional capital, according to the resolutions, would be used to eliminate the loans with foreign exchange exposure risk, accrued interest on these loans and overdraft.

    Sa Siat nv, which holds 60 per cent majority equity stake in Presco, will provide nearly two-thirds of the rights funds. First Inland Bank/Fidelity Finance Company (TRDG), which holds 8.0 per cent equity stake, is expected to provide the second largest chunk of the funds. Presco has some 9,415 shareholders with the largest group of shareholders holding small units within the range of 1000 to 10,000 shares.

    The company has struggled with declines in sales and profit in 2013. The steep decline led to 90 per cent reduction in cash dividend. While the company had distributed N1 billion annually as cash dividends for the 2011 and 2012, the company is distributing N100 million payout for the 2013 business year.

    While shareholders had received a dividend per share of N1 in 2011 and 2012, they will now receive a dividend per share of 10 kobo.

    The decline in dividend payout partly reflected the downturn in the operations of the company. Key extracts of the audited report and accounts for the year ended December 31, 2013 showed that net profit dropped by 62 per cent from N3.49 billion to N1.34 billion. Profit before tax had dwindled from N3.88 billion to N2.33 billion. Operating profit declined from N4.19 billion to N2.72 billion. Gross profit slumped to N4.62 billion in 2013 as against N5.24 billion in 2012. Aggregate turnover dropped to N8.49 billion in 2013 compared with N11.25 billion recorded in 2012.

    Chairman, Presco Plc, Mr. Pierre Vandebeeck, blamed the decline on the provisions of the International Financial Reporting Standard (IFRS) and slowdown in the operating environment.

    According to him, the company used the IFRS in the 2013 audited report, which required revaluation of biological assets on the basis of international price of assets as at the year-end. While there were no decline in the price of oils in Nigeria by the year-end, there was a decrease in the world market price of biological assets and oils, which led to a revaluation loss of about N1 billion.

    He said the management had an inkling that the 2013 performance might not be as good as the previous year given the changing operating conditions.

    “We had a robust 2012 with high commodity prices, coupled with good production and marketing. Management worked hard enough and achieved good result. We knew by the end of 2012 that it will be difficult to repeat the performance in terms of absolute figures and hence concentrated on achieving improved efficiencies, further value addition and consolidation of gains made in the past years,” Vandebeeck said.

    He noted that in spite of the obvious decline in performance, the company actually performed very well in 2013 as it achieved impressive records in production, new acquisitions, manufacturing facilities, planted areas as well as business efficiency.

    “We are in the plantation business and our profits come from the trees we plant. That remains the focus. As long as we take care of our plantation, ensure that we continually add to the planted area, control leakages and improve efficiencies, we have no fear. Nigeria presents a unique market wherein the buying power of its population is increasing, food grade oil is in short supply, abundant labour and land and good weather,” Vandebeeck said.

    He said the outlook for the company in 2014 appears brighter citing the first quarter performance.

    Presco primarily engages in the development of oil palm plantations, palm oil milling, palm kernel processing and vegetable oil refining. The main products of the company included refined bleached and deodorized palm oil, palm olein, palm stearin, palm fatty acid distillate, palm kernel oil (crude and refined) and palm kernel cake.

  • Presco vs Okomu Oil: Same weather, different planters

    Presco vs Okomu Oil: Same weather, different planters

    Agriculture is the main point of national transformation agenda. It’s also a major rallying point at the stock market. Okomu Oil Palm Plc and Presco Plc are the two dominant stocks in the agriculture sector. With market capitalisation of about N72 billion, the two stocks account for some 90 per cent of total market capitalisation of the five stocks listed under the agriculture sector. With hectares of palm oil plantations, they represented the vast agriculture potential of Nigeria. Both Okomu Oil Palm and Presco are integrated agricultural companies with oil palm plantations, palm oil mills, crushing plants and oil refining plants. They engage in cultivation of oil palm and extraction and refining of palm oil into finished products. They are major suppliers of specialty fats and oils to several large and medium companies. Besides similarity of business operations, the two companies shared several similarities including the location of their farms in Edo State and substantial foreign shareholdings. They are also companies of nearly the same size and run the same business year.

    Okomu Oil Palm, the older and the larger of the two companies, was incorporated in 1979 and listed its shares on the Nigerian Stock Exchange (NSE) in 1991, the same year Presco was incorporated. Okomu Oil Palm opened yesterday with a market capitalisation of N46.26 billion, nearly twice the market value of Presco Plc, which opened at N25.38 billion. Besides, Okomu Oil Palm has a larger balance sheet; including total assets and net assets.

    Presco became a public limited liability company and listed its shares on the NSE in 2002. With total assets of N28 billion and net assets of N17.1 billion, Presco still boasts of substantial capacity in the largely small-sized operations that dominate the agriculture sector.

    But though they share several similarities, latest fundamentals of Presco and Okomu Oil appear to be illustrating the proverbial rain that showers on sugarcane and bitter leaves farms. While the audited reports for 2011 had shown striking fundamental similarities with all key indices of the two agricultural stocks jumping to new highs, latest audited reports and accounts for the year ended December 31, 2012 show striking fundamental dissimilarities.

    From turnover to profit and returns, Presco extracted itself as the better of the two companies, and with sustained growths, assumed the leadership of the industry in terms of turnover and profitability. Both actual and underlying profit and loss measures placed Presco ahead with its real operational profit twice that of Okomu Oil. Okomu Oil failed to sustain its growth momentum as decline in sales coloured the bottom-line negative. With the bumper harvest in 2012, Presco now outpaces competition in all key averages, setting long stride that will require equally jumpy growth by the competing stocks to catch up.

     

    Sales Generation

    Okomu Oil Palm could not sustain its previous jumpy sales growth as sales revenue dropped by 8.8 per cent in 2012 as against impressive growth of 82.7 per cent. Average sales growth in the past two years thus stood at 36.95 per cent. The top-line performance in 2012 was the poorest in recent years. It had increased sales by 52 per cent in 2010.

    Presco grew its turnover by nearly a third, sustaining year-on-year impressive growth in sales that had seen the top-line expanding annually by an average of 45 per cent in recent years. Presco’s gross incomes rose by 32 per cent in 2012 compared with increase of 58.5 per cent and 35 per cent in 2011 and 2010 .

     

    Profitability

    Both actual and underlying profitability indices of the companies showed the same colouration as the top-line. Presco consolidated its profitability and leveraged on higher sales and increasingly efficient cost management to displace Okomu Oil Palm as the highest-profitable agric stock. Okomu Oil Palm’s actual pre and post tax profits dropped marginally, although the underlying profit-making capacity remained steadied.

    Presco was clearly in better grip of cost management and profitability. Gross profit doubled by 107 per cent in 2012 as against increase of 84 per cent in 2011. Profit before tax leapt by 229.8 per cent in 2012, consolidating 93 per cent recorded in 2011. After taxes, net profit jumped by 378 per cent in 2012 as against 55 per cent in 2011.

    On the other hand, Okomu Oil Palm recorded a decline of 6.7 per cent in profit before tax, a reversal from impressive growth of 136 per cent recorded in 2011. Net profit after tax also reversed with a negative of 8.5 per cent in 2012 as against growth of 141 per cent in 2011.

    On the average, Presco significantly outperformed its competitor with average pre-tax profit growth of 162 per cent as against Okomu Oil Palm’s 65 per cent. Presco’s average net profit growth in recent years stood at 216 per cent compared with 66 per cent recorded by Okomu Oil Palm.

    Besides, there was significant improvement in the profit-making capacity of Presco compared with almost flat position of its peer. Presco’s gross profit margin improved from 47.5 per cent in 2011 to 74.3 per cent in 2012, indicating average margin of about 61 per cent. Pre-tax profit margin also more than doubled from 32 per cent to about 80 per cent, representing average pre-tax profit margin of about 56 per cent. Okomu Oil Palm’s average profit margin has steadied at 42.35 per cent in recent years, hovering between 41.9 per cent in 2011 and 42.8 per cent in 2012.

     

    Actual Returns

    Returns to shareholders and other stakeholders also showed similar patterns to profit and sale trends. While Presco improved underlying returns considerably, Okomu Oil Palm’s returns dwindled to their recent lows. Presco returned 32 per cent on average assets in 2012 as against 10.9 per cent in 2011, indicating average return on total assets of 21.5 per cent over the years. Return on equity-to shareholders who provided the equity funds, also improved from 9.6 per cent to 50 per cent. This indicates average return on equity of about 30 per cent.

    Okomu Oil Palm’s returns generally fell below average in 2012 with average returns of 14 per cent and 14.1 per cent on total assets and equity funds respectively. Returns on total assets and equity funds had stood at 20 per cent and 21 per cent respectively in 2011. Average returns on assets and equity thus stood at about 17 per cent and 17.4 per cent.

     

    The Bottom-line

    There is no doubt about the immediate, medium and future prospects of the agriculture sector. In spite of the pervasive influence of crude oil on national income, agriculture remains the dominant sector of the Nigerian economy. With estimated land area of 910,768 square kilometres out of a total area of 923,768 square kilometres, Nigeria is largely an agrarian economy with agriculture the largest sector and biggest employer. Nigeria’s arable land use stands at more than 33 per cent. From the North to the South, from West to East, Nigeria’s climate and terrain are suitable to cultivation and breeding. Notable agriculture produce across the regions include Cocoa, Peanuts, Palm oil, Corn, Rice, Millet, Cassava, Sorghum, Yams, Rubber, Cattle Sheep, Goats, Timber, Fish among others.

    Over the years, agriculture has shown considerable resilience and it has increasingly become a major catalyst for Nigeria’s growing Gross Domestic Products (GDP). Government’s fiscal policy measures aimed at encouraging domestic agricultural companies also appeared to be impacting positively on the sector. The Federal Government has granted several incentives to agriculture sector including a zero duty on agricultural machinery and equipment with effect from January 31, 2012. Besides, many agricultural companies had benefitted from financial incentives from the Central Bank of Nigeria (CBN), which helped to reduce financial leverage and pressure on the bottom-line. More than before, there is a strong linkage between the central government and the private agric operators, which enabled Nigerian farmers to make input and directly benefit from government’s policies.

    The performance of Presco and Okomu Oil reflected the differing potential of each operator, although the macroeconomic environment generally remains positive. The difference appears to lie in the growth and investment plans of the companies. Presco has maintained a meticulous investment programme which included planting and replanting of new and existing plantations and expansion of processing capacity.

  • Presco’s share up by 96.08%

    Presco, one of the major players in the agricultural subsector, has grown its share value by 96.08 per cent from an opening figure of N8.67 to close the year at N17.00 per share.

    Speaking at the company’s end of the year party, its Managing Director, Mr Uday Pilani, said the company has been able to surpass 2011 records both in terms of product volume and turnover, from a turnover of N8.5 billion in 2011, adding that turnover for 2012 could exceed N11 billion.

    He expressed optimism that with the support of workers and the dynamic and excellent marketing strategy exhibited by the marketing team, there will be remarkable improvement in the year ahead.

    “We have in the course of the year acquired additional 3,200 hectares of land at the Ologbo Estate. Work is going on for the demarcation of the boundaries preparatory to 2013 planting season. The acquisition of over 14,000 hectares at Orogho/Obagie Nunuamen in Orhiomwon Local Government Area of Edo State will also be ready for occupation next year, also, we are in the process bidding for the takeover of the Edo State Government’s Uronigbe Rubber Estate and this will hopefully materialise early in 2013,” Pilani said.

    However, he pointed out that 2012 had been a very challenging year for the vegetable oil sub-sector of the economy, particularly due to what he identified as government’s policy on the importation of palm oil.

    According to him, the company was able to pursue its processing capacity and plantation expansion programmes as planned while the Bio-methenisation project which will ensure that it operates 100 per cent with green energy is very much on course and will be completed early next year.

    “Presco continues to create additional value for its products by regular investment. We are currently investing in pellet plant for the export of palm kernel cake, bottling plan for the sale of oil to retail customers and packaging plant. A palm kernel fractional plant, the first in Nigeria is also to be added in 2013, to make bakers fat.

    “There is, therefore ample opportunity for career growth and development for people who are determined, hardworking, committed and loyal and for those who are willing to learn,” Pilani said.

    He explained that the yearly event was a way of acknowledging the contributions of workers and rewarding excellence while it also affords the company the opportunity to socialise, take stock of its performance for the year and chart the course for improved performance in the New Year.

    At the event, over 22 workers were honoured for their contributions to the growth of the company over the years.