Regardless of how well it’s performing, when a company carries a high finance cost (primarily the interest paid on debt), it essentially has a “heavy backpack” that it must carry. While debt can fuel growth, if the costs become too high, it creates a domino effect across the business. A typical example is Presco Plc which grapples with a growing interest burden.
From an agricultural standpoint, Presco Plc is in its prime. Global demand for crude palm oil (CPO) remains robust, and the company has mastered the art of vertical integration. Its successful integration of assets like the Siat Nigeria Limited (SNL) acquisition has boosted production capacity.
Also, high local prices and a supply gap in the Nigerian market have pushed Presco’s top-line revenue to impressive heights. Likewise, the company remains one of the lowest-cost producers in West Africa, boasting strong operating margins.
Behold the heavy backpack…
However, Presco Plc “liquid gold” is being used to quench its thirsty debt profile. In a climate of rising interest rates and currency volatility, that debt has become a heavy backpack, on the agribusiness company. Analysts are still reviewing their target price (TP) for the stock which recently reached its 52-week high.
Though the company’s stock recently reached a 52-week high of N2,015 as against 52-week low of N850.1, the market generally dislikes high leverage unless it’s producing massive growth. This is a factor to monitor despite that the stock has rallied this year by 38.97 percent.
Presco Plc reported revenue of N331.189billion in 2025, up by 59.61 percent from N207.504billion in 2024. Also, the company’s gross profit of N237.197billion in 2025 as against N147.779billion in 2024 represents an increase by 60.51 percent.
“Presco Plc reported its full-year 2025 results, marked by significant revenue growth and improved profitability margins, alongside expected seasonal volatility and an increased financial leverage profile,” said Lagos-based Coronation Research analysts in their recent note.
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Finance cost up by 240.99%…
The company’s finance cost rose by 240.99 percent, from N12.792billion in 2024 to N43.620 billion in 2025. This means that Presco finds itself in a classic corporate paradox – It is “asset rich” but “cash constrained” by its obligations.
Also, CardinalStone Research analysts noted that Presco’s improved earnings in 2025 was supported by robust topline performance, the impact of a full-year consolidation of GOPDC in the period, and an uptick in gains on biological asset valuation, which offset a softer Q4’25 performance.
“Revenue growth came in at 59.6 percent year-on-year (YoY) to N331.2 billion, supported by robust performance in the Nigerian segment (+38.6percent to N245.3 billion), alongside the full-year consolidation of the Ghanaian subsidiary. Total revenue (including exports) from GOPDC printed at N85.9 billion, contributing 25.9 percent to total revenue,” they added.
Profit before tax (PBT) rose from N113.533billion in 2024 to N178.559billion in 2025, up 57.27 percent, while profit for the period increased to N138.116billion, up by 76.84 percent from N78.103billion in 2024.
“Net finance costs increased by 184.9 percent YoY to N35.8 billion, largely due to the N82 billion bond issuance during the year. This compressed PBT margins by 0.8 ppts to 53.9percent. However, a lower effective tax rate of 22.6percent for the period (versus 31.2 percent prior) helped boost net earnings, as net profit margin increased by 4.1 percentage points (ppts) to 41.7 percent,” CardinalStone analysts further said in the February 2 note on Presco titled “Scale benefits and revaluation gains outweigh softer Q4’25 performance”.
Even as Presco’s operating profit climbs, the high finance cost—the interest Presco paid to banks—acts like a leak in the bucket. Presco’s strong harvest is visible in the revenue and gross profit, but the heavier debt service is what investors see in the narrowed net profit margins.
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For Presco, the harvest is undeniably strong. The palm trees are producing, the demand for crude oil palm (CPO) is there, and the operational engine is firing on all cylinders. But for the company to truly soar higher, it must find a way to lighten the debt load. Until then, the company remains a high-performing athlete running a race with a very heavy pack on its back.
The company’s full year 2025 financials show that Presco’s Return on Average Equity (ROAE) decreased from 54.79 percent in 2024 to 43.31 percent in 2025, representing a dip by 1,148 basis points (bps). Return on Average Equity is a financial profitability metric which measures how efficiently management uses equity capital to generate profit.
“The company’s capital structure changed substantially following a rights issue that raised approximately N250billion. This resulted in a 2.02x increase in total equity. Consequently, return metrics declined, with Return on Average Equity (ROAE) at 43.31 percent (FY 2024: 54.79 percent) and Return on Average Assets (ROAA) at 21.11 percent (FY 2024: 23.59percent).
“The debt-to-equity ratio increased to 0.38x from 0.26x in the prior year. Finance costs rose to N43.62billion from N12.79billion in FY 2024, resulting in a lower interest coverage ratio of 4.06x (FY 2024: 8.18x). The company ended the period with a net cash position of N115.58billion, compared to a net debt position of N24.04billion in the previous year.
“Strategic developments during the period included the completion of the GOPDC acquisition and the December 2025 announcement of an acquisition involving approximately 10,000 hectares of plantation assets in Cross River State,” Lagos-based Coronation Research analysts further noted.
According to the analysts, the company’s performance in 2026 will be influenced by global palm oil price movements, the integration of the newly acquired assets, and the deployment of capital raised through the rights issue. “The impact of increased finance costs on profitability and the execution of expansion plans will be key factors to monitor,” they noted.
