Tuesday, November 3,
2020 / 07:12 PM / by CardinalStone Research / Header Image
Credit: African Financials
(PRESCO: TP - N58.22) reported a marginal decline (-0.3% YoY) in earnings after
tax to N640.4 million in its Q3'20 unaudited results. The company's top line
growth was offset by operating costs and asset disposal losses.
a 14.3% YoY increase in gross profit to N2.9 billion in Q3'20. The increase was
driven by higher quarterly sales (+13.9% YoY) leading to a slight improvement
in gross margin to 52.7% (+0.2 ppts). The continued jump in sales may be
related to its recent expansion in oil palm processing capacity
Higher administrative costs (+19.4% YoY)
and a jump in 'other losses' to N223.2 million (vs N700 thousand in Q3'19)
eclipsed savings in S&G costs (-10.3% YoY) to drive down EBIT (-9.8% ) on a
year-on-year basis. We note that 'other losses' largely referenced asset
disposal losses in its FY'19 financials
Finance costs fell for the third
consecutive quarter to N388.2 million (-5.3% YoY). The moderation in finance
costs may reflect the company's materially lower short term borrowings on its
balance sheet (N3.5 billion vs N9.2 billion in FY'19).
Presco's negative cash position deteriorated further during the quarter leading to N1.3 billion in additional overdraft drawdown. To this point, we note that cash used for principal and interest repayments largely outweighed cash accretion from operating activities.