Presco: Thriving in a Troubled Economy


Though this year was dominated by serious economic upheavals and depressed capacity utilisation, Crusoe Osagie writes that Presco Oil Palm Plc bucked the trend by staying afloat

Last week, Presco Oil Palm Plc hosted staff, friends and well wishers to a feast at one of its sprawling oil palm estates in Obaretin community, just outside Benin City.
At the event, staff, customers, community members and well wishers were feted in a manner that temporarily distracted all present from the pervading fears of the effect of the ongoing economic recession.
Clearly, these are not the best times for operators within the Nigerian economic space.

According to Focus Economics, a firm of economic forecasters, Nigeria is currently facing its worst economic crisis in more than 20 years as the economic contraction worsened more than expected in the third quarter (Q3), driven by a contraction in the oil sector, which is the country’s largest source of revenue.

Further underscoring the distress of the nation’s economy, the firm said economic activity remained weak and structural imbalances persisted, with the non-oil sector posting flat growth in Q3 after contracting for two consecutive periods.
“The output cut agreement reached first by OPEC members in late November and on 10 December by OPEC and non-OPEC members should give Nigeria’s beleaguered economy some breathing room since the deal exempts the country from cutting production,” the firm noted.

Other economic experts say that Focus Economics posted the most ambitious review of the Nigerian economy in 2016, insisting that there was no growth what so ever in 2016, along with the complete lack of potential for growth in the year ahead.

Manufacturers cut capacity to less than 30 per cent, letting not less than five million staff go within in a period of about 11 months.
A mix of declining purchasing power, dwindling capacity, foreign exchange scarcity, security threat among other maladies has put off the most optimistic investors and operators.
However, Presco, against all odds has decided to continue investing in the nation’s farming and agro processing sectors.

Managing Director of Presco, Mr. Felix Nwabuko, expressed the company’s enthusiasm about the nation’s economy at the 2016 end of year party.

The company leveraged on its skills and experience in dealing with economic crisis in other African countries as well as nations in Asia, where it has vast operations, to keep its head above water in 2016.

While other companies laid off workers, Presco took on new projects employing more workers. One of them is the expansive Sakponba plantation development which the company promoted in the midst of the recession, leading to more hands being hired in the farm segment of the business and more hands being potentially needed in the processing arm once the plantation begins to yield output.

At the event, while thanking all staff for a successful 2016, Nwabuko also noted that the company has been rated by the government of its host state, Edo, as the best tax payer in the entire state.

Satisfied Shareholders

Earlier in the year, the directors of Presco Plc recommended a dividend of N1billion. Details of the audited results of Presco showed that the company posted a revenue of N10.448 billion in 2015, up by 14 per cent from N9.138 billion in 2014. Cost of sale increased by 19 per cent from N3.119 billion to N3.813 billion, while gross profit rose by 12 per cent from N5.938 billion in 2014 to N6.635 billion.

Profit before tax fell by 46 per cent to N4.215 billion, from N7.900 billion, while profit after tax (PAT) fell by 55 per cent from N5.194 billion to N2.321 billion. The fall in profit was affected by a drop in gains on biological assets revaluation, which fell by 82 per cent from N5.773 billion to N1.062 billion.

Also, the company spent more on financial charges in 2015, compared with 2014. Finance cost by 49 per cent rose from N363 million to N707 million in 2015.
Despite the fall in bottom line, the company recommended a dividend of N1 billion, which translate to 100 kobo per share.

Presco specialise in the cultivation of oil palms and in the extraction, refining and fractioning of crude palm oil into vegetable oil and palm stearin. The company operates from two states, Obaretin Estate and Ologbo Estate in Edo State and Cowan Estate in Delta State. Another Estate in Sakponba, Edo State, is now coming on stream.

Victory as Naira Slumps
While several industries continuously lamented the tension on their businesses caused by the slumping Naira due to the unavailability of forex in the market, Presco came out a winner from the situation. The company’s sales improved.

Nwabuko earlier praised the federal government policy for its sales improvement, saying: “The policy of ferex restriction is bringing a boost to us in the sense that people who would ordinarily have imported, using government foreign exchange, are not doing that anymore,’’ he said.

Although the company has its own troubles accessing the forex required for it to obtain production materials like fertilizer and equipment, Nwabuko said that the company has plans to increase its export of palm kernel to The Netherlands to enable it access forex and play a part in shoring up the Naira.

Rising Investment Profile
The investment injected into the Nigerian economy by Presco in the past one decade has risen close to $1 billion.
With the company bringing in a minimum of $100 million investment into the country annually for the past ten years, its total investment in the country has risen to about billion dollars during the period.
Earlier, the Chairman of the company, Mr. Pierre Vandebeeck, explained that the investments included procuring high quality state-of-the-art ‎equipment, automated steam turbines and a biogas plant for power generation, oil palm processing mills, refinery plants and machineries.

Vandebeeck in an interview with THISDAY, said the company is going forward by building a new refinery and oil mill that would gulp another $30 million to boost oil palm production in Nigeria.

According to him: “I have not done the feasibility study yet but the cost estimate for the oil mill is about $20 million and the refinery is $10 million summing up to a $30 million investment. A hectare of new plantation is about $6000 to cultivate. So multiply that to know how much we are investing every year. We are not stopping. We are like a vehicle driving very fast all the time, although I sometime ask if we should slow down a bit but there are so many opportunities that come up that we do not want to miss and therefore you are more or less pushed to continue investing. ‎”

Every year, the company cultivates thousands of hectares of land on average along with initiatives in alternative electricity generation investments, oil palm processing and refining among others, all keeping investments flowing into the country from the firm.

Meanwhile, the company also opened a new chapter in its history, through the appointment of its first Nigerian Managing Director, Mr. Felix Nwabuko, to guide the company to success in its goal of remaining the most innovative and reliable operator in the sector globally.

Nwabuko, with vast experience spanning about three decades, in KPMG, Siat Group, University College, London among others is the new man driving the company towards its set objectives.

Also, the Presco chairman, said the company has just began a new chapter by acquiring a biotechnology company in Belgium to produce high performing planting materials to achieve greater quality yield.

“We are the only company in this industry in the world that has succeeded in cloning rubber trees. We started two years ago and will be planting our first cloned rubber trees in Ivory Coast and Ghana because we believe through this system we will be increasing the rubber yields by about 30 per cent per hectares which is about two tonnes to three tonnes, but I believe it will be more‎,” he said.

He noted that for the past 10 years, Presco has been investing in what he described as a genetic block of oil palm, having over 200 different crosses ‎and varieties from all over the world, saying that the company will propagate and make it available to anyone willing to pay the price.

“We have the first result for this and five years after planting, we added 20,000,000 per hectares with an extraction rate of 29 per cent and this means we are doubling the oil yields per hectare from what is coming now.‎ We are doing the same thing ‎for cocoa because personally I believe in three crops which are rubbber, oil palm and cocoa. We are going to produce high performing clones that are disease resistant,” he said.

He pointed out that the investment which is recurrent and ‎gulping a lot of resources is a project not only for the company but for farmers to use for growing high quality yields in their various farms across the country.

‎”This is an investment that is recurrent and gulping a lot of money. We have the best scientists working on this project. We are making this project available not for our plantations only. I consider our company as a commercial entity where we have our presence in different parts of the continent of Africa, growing platforms to produce top planting materials for whoever wants to buy it.

“We are committed to research and development and also devote each year, more resources to this activity. Indeed we are, together with our international partners, at the forefront in the development of improved oil palm and rubber planting materials, which aims at selecting strains adapted to our soil and weather and with increasing yield per planted hectare,” he said.