Presco Plc announced a pre-tax profit of N20.781 billion for the second quarter that ended on June 30, 2024, a rise of 159.77% YoY.
The H1 2024 pre-tax profit of N50.439 billion is a result of this performance, which topped the pre-tax profit for the entire 2023 year by 0.86%.
Additionally, as can be seen from the company’s Q2 2024 financial statement, sales of crude and refined products drove a large increase in revenue, which outpaced the growth in cost of sales and contributed to the profit growth.
Revenue in Q2 2024 increased 74% year over year to N45.474 billion, while revenue in H1 2024 reached N88.02 billion, or around 86% of the revenue for 2023 as a whole.
Q2 2024 Over Q2 2023 Key Highlight
- Revenue: N45.474 billion +73.86% YoY
- Cost of sales: N13.685 billion +30.51% YoY
- Gross profit: N31.790 billion +102.86% YoY
- Administrative expenses: N7.582 billion +34.41% YoY
- Selling & Distribution expenses: N630 million +79.68% YoY
- Exchange Losses: N1.710 billion +1,127.02% YoY
- Operating profit before finance income and finance cost: N22.725 billion +130.43% YoY
- Finance cost: N2.139 billion +14.32% YoY
- Profit after tax: N14.82 billion +189.44% YoY
- Earnings per share: N14.82 +189.45% YoY
The 159.77% YoY rise in pre-tax profit, as discussed below, shows robust profitability and efficient cost control, particularly given that revenue is increasing more quickly than cost of sales.
The capacity to increase revenue more quickly than the cost of sales is a sign of successful operational and cost control, both of which are essential for preserving strong profit margins. Impressive and strong are the Q2 2024 gross profit margin of 69%, EBITDA margin of 50%, pre-tax margin of 46%, and net profit margin of 33%.
The company appears to be earning a big amount of revenue and keeping a sizeable percentage of it as profit through strategic cost controls and efficient operations, as indicated by the high margins observed across several phases of the profit calculation process. Additionally, it can imply that Presco Plc enjoys a substantial competitive advantage in the market thanks to strong product demand, economies of scale, and successful pricing tactics.
Furthermore, the company appears to be headed for a better year than its previous one, potentially setting new records, if it can beat the pre-tax earnings for the entire year 2023 in the first half of 2024.
But in the second quarter, the company reported an exchange loss of N1.7 billion, a significant rise of 1,127% year over year. The exchange gain in Q1 2024 was N5.4 billion; however, this exchange loss restrained it to N3.66 billion in H1 2024.
The company was exposed to large currency changes, as evidenced by the decline from Q1 to Q2, even if it was still able to report an exchange gain for H1 2024, BrandSpur business and economy news reports.
Furthermore, the business reported N2.139 billion in high-interest charges in Q2, bringing the total amount of interest expenses for H1 2024 to N4.418 billion.
Presco Plc is producing enough revenue to adequately pay these costs in spite of these growing interest expenses, which are attributable to its sizable loan book. Its healthy interest coverage ratios of 10.63 in Q2 and 12.33 in H1 2024 are indicative of this.
These robust interest coverage ratios, along with notable increases in earnings and revenue, should encourage investors’ optimism and boost investment as well as sentiment among them all.
The share price saw year-to-date (YtD) gains of 40.4% last year and 98.5% this year, placing it eighth on the NGX for YtD performance.
Based on the most recent annual dividend per share of N26.30 (which consists of an interim dividend of N2 and a final dividend of N24.30), the stock delivers the highest dividend yield in its sector, 6.87%.
Presco has regularly distributed dividends for the previous five years. It is fair to expect that the company will maintain or perhaps surpass the dividends paid out in 2023, beginning with an interim dividend for H1 2024, given that the profit after taxes for the first half of 2024 has already surpassed the profit after taxes for the full year 2023.
However, Presco Plc is a strong investment choice overall because of its strong performance, which is demonstrated by its good profit margin, outstanding interest coverage ratios, and notable share price increases. It also has a high dividend yield and consistently pays dividends.
Investor interest and confidence are anticipated to increase in the company as a result of its ability to effectively handle FX volatility/loss and high-interest charges while generating significant earnings growth. This will increase the company’s overall appeal to investors.
