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Presco, a producer of specialty fats and oils, has not had the best start to 2019 as bottom-line slowed by double digits in the first quarter of 2019 following the company’s unimpressive performance in 2018 full year.
The performance of Presco in the first three months of 2019 was affected by weaker sales, an elevation in its Selling, General and Administrative expenses and a surge in its finance cost.
The palm oil producer reported N2.14 billion as profit for Q1 2019, a 17.58 decrease from N2.6 billion posted in the corresponding quarter of 2018.
Even though the Q1 2019 figure is the lowest in the last three years, analysis of company’s earnings in the first quarter of the last five years shows current figure as its second best without accounting for 2017 Q1.
In Q1 2019, Presco recorded a 17 percent decline in revenue which fell to N5.51 billion from N6.59 billion it had in the same period of 2018. Cost of sales for Presco dropped by 44 percent to N822.16 million resulting in a gross profit of N4.68 billion, 8.74 percent less than N5.13 billion for Q1 2018.
Even though top-line shrank, gross margin showed an improvement in the review period with Presco retaining N85 from every N100 sales in Q1 2019 as against N78 from every N100 sales in Q1 2018 after deducting the cost of goods sold.
Selling, General and Administrative Expenses grew to N1.57 billion in the three months to March 2019, 15.91 percent more than Presco had incurred a year ago. Other income for the agri-business surged 145 percent to hit N84.24 million in the review period.
Presco’s operating profit after accounting for the change in fair value of biological asset dipped by 16 percent in Q1 2019, as there was no loss or gain in the fair value of biological asset year-on-year in Q1 2019.
A sharp rise in finance expenses by 86 percent weighed on the company’s profit before tax which dropped to N2.58 billion in Q1 2019 from N3.43 billion in Q1 2018, a 48 percent decline in income tax for Presco could do little to turn the corner as profit after tax plunged 17.58 percent in Q1 2019.
Net margin, which shows how much net income or profit is generated as a percentage of revenue, dropped marginally to 38.88 percent in Q1 2019 from 39.41 percent in Q1 2018.
Presco’s earnings per share shed 17.69 percent to N2.14 in the quarter from N2.6 it previously stood at in Q1 2018. Shares of Presco remained flat at N58 per share at the close of trading on Friday.