Presco moves to acquire 100% stake in Ghana Oil Palm Development Company

The Management of Presco has made a significant decision to acquire a 100 per cent equity stake in Ghana Oil Palm Development Company, with an initial consideration payment of 64.96 million dollars. Victory George, Investment Research Analyst at Meristem Securities, joined CNBC Africa to provide insights into the impact of this acquisition and discuss other updates in the commodities market. George highlighted that Presco's move towards acquiring the Ghana Oil Palm Development Company is part of the company's strategic plan to become a major player in the oil industry in Africa. This acquisition aligns with Presco's long-term goals and vision for growth and expansion. Drawing parallels to Presco's acquisition of SEAT Nigeria PLC in 2021, the Ghana Oil Palm acquisition represents another step towards solidifying Presco's position in the market. One of the key reasons behind the acquisition is currency diversification. With a significant portion of revenue coming from the domestic market, expanding internationally through acquisitions like Ghana Oil Palm provides Presco with a hedge against effects pressures facing Nigeria. By venturing into the international market, Presco aims to diversify its revenue streams and strengthen its position in the industry. In terms of the outlook for the oil industry, George remains optimistic about the sector's growth. Both Presco and Okomo Oil have shown positive results, with an uptick in top-line and bottom-line figures. The top-line growth is expected to continue, driven by increased prices in both domestic and global markets. As companies focus on managing cost pressures, improvements in bottom-line performance are anticipated, benefiting both Presco and Okomo Oil. George addressed concerns regarding Ghana Oil Palm's net revenue forecast for 2024, emphasizing that effective cost management strategies will be crucial. As companies explore alternatives like the use of biomass as a substitute for fossil fuels, they aim to mitigate cost pressures and maintain profitability. The anticipated growth in top-line figures is expected to offset rising costs, ensuring overall financial stability. Discussing the commodities market as a whole, George touched upon the volatility observed this year, particularly in cocoa prices. Global factors, such as adverse weather conditions in cocoa-exporting regions like Cote d'Ivoire, have impacted supply, leading to price fluctuations. While improved supply conditions are expected to stabilize prices in the future, near-term projections suggest that prices for specific commodities, including cocoa, may remain elevated. In conclusion, Presco's acquisition of Ghana Oil Palm underscores the company's strategic vision for growth and expansion in the commodities market. With a focus on currency diversification, revenue growth, and cost management, Presco aims to strengthen its position as a key player in the industry. As the commodities market navigates through challenges and opportunities, strategic moves like this acquisition reflect the dynamism and resilience of companies in the sector.