Presco Oil Palm Plc

28/08/2012 (THISDAY Live) - Crusoe Osagie highlights the success of Presco Oil Palm Plc, a local vegetable oil producer as a possible model that could be adopted to liberate Nigeria from its dangerous dependence on imported oil

Nigeria’s Fall From Grace
After leading the world in the 1960s and 1970s in palm and other vegetable oil production, Nigeria now shamefully depends on countries like Malaysia, to bridge the huge gap between demand and supply of vegetable oil in the country. More disgraceful though is the fact that Malaysia, the country, which now helps Nigeria meet its critical domestic and industrial needs for vegetable oil, actually sent emissaries to her in the 1960s to learn the techniques of oil palm propagation.

The Malaysians also took the first set of seedlings they cultivated from the Nigerian Institute for Oil Palm Research (NIFOR) in Edo State. The rest as it is often said is history, as Malaysia has since improved on the knowhow garnered from Nigeria and become world beaters in the global vegetable oil industry.

Over four decades since agriculturists at NIFOR taught Malaysians how to cultivate oil palm, the table has turned much to the shame of the managers of Nigeria’s agricultural sector. According to global market statistics, Malaysia currently earns more foreign exchange from its oil palm industry across the value chain than Nigeria earns from the exploitation of its hydrocarbon resources. With over 300,000 tonnes per annum gap between local production of vegetable oil and demand, a lot clearly needs to be done.

However, there are a few glimmers of hope in the oil palm industry in Nigeria and one of such sources of hope is Presco Oil Palm Plc. Regulators of the nation’s agricultural sector need to study carefully and possibly replicate the efforts that have gone into the establishment of this integrated agricultural company as a good method of ending the country’s addiction to vegetable oil of foreign origin.

The Presco Enterprise
In the 1970s, Bendel State government, now Edo State and Delta State, initiated a programme for the development of oil palm plantations with financing from the World Bank. This resulted in the incorporation of the Oil Palm Company Ltd (OPC) owned by the state. The company established an oil palm plantation called the Obaretin Estate and planted 1,150 hectares between 1975 and 1980.

The plantation is located in the Ikpoba-Okha Local Government Area of Edo State at km 22 on the Benin City-Sapele road. Institutional investors out of Europe called the Siat Group, became involved in Presco in 1991, at which time there were 2,700 hectares planted at Obaretin Estate. Under Siat’s management, a new expansion programme commenced from 1993 and an additional 3,000 hectares was planted at Obaretin Estate. The total planted area at Obaretin as at today is 5,631 hectares.

In 1996 Presco acquired the 2,780 hectare Cowan Estate at Ajagbodudu, Delta State, from the Delta State Government-owned Oil Palm Company Ltd.

In 2002, Presco acquired another 6,000 hectares from Edo state government and further 1,500 hectares from other parties making a total of 7,500 hectares.

The company’s operations are fully integrated with plantations, palm oil mill, palm kernel crushing plant and vegetable oil refining plant. It is the only fully integrated oil palm operation in Nigeria.

Presco, which is one of the only two agriculture companies quoted in the Nigeria Stock Exchange (NSE), is one of the largest employers of labour in Edo and Delta states, with a total of about 2,500 employees. Indirectly, Presco’s operations positively impact on the livelihoods of many more people through transport contracts, construction contracts, fresh fruit bunches and kernel purchases from farmers, as well as by the company being a large consumer of goods and services.

The company also initiated an out-growers scheme in collaboration with Edo State government. Under the scheme, smallholder farmers will prepare their lands for oil palm cultivation, while Presco supplies farm inputs with subsidy from the state government to these small farmers. The oil palm giant also provides the technical knowhow to ensure a good harvest while also assuring the small-scale farmers of a guaranteed market for their produce at prevailing market price upon harvest.

Currently, Presco’s total planted area is more than 11,351 hectares of oil palm. New planting in Ologbo, Delta State is on-going. So far 3,143 hectares have been planted (1,000 hectares in 2011) and over 1,200 hectares budgeted for 2012.

Presco also operates a vast palm oil processing and refining factory, where the output from the various plantations is transformed from fruits to palm olein deodorised (vegetable oil) and palm sterin. It does not stop at this first stage of processing. It further refines these processed oils into various vegetable fat products, used widely in the cosmetic industry, pharmaceutical industry and in food processing companies.

This initiative has helped companies such as Friesland Wamco, Nestle, Unilever, Cadbury and several other multinationals to cut down the volume of this specialised fat, which they import as input for the manufacturing of their various industrial products, thereby saving scarce foreign exchange.

Presco’s palm oil milling capacity is presently 48 tonnes of fresh fruit bunches (FFB) per hour; the palm kernel crushing plant operates at 45 tonnes per day; the refinery has recently been increased to 100 metric tonnes per day while the fractionation plant capacity and refined products capacity is 60 tonnes per day.

Soaring Profits
With profit after six months of business in 2012 now almost above the entire profit of N1.69 billion made in 2011, the Managing Director of Presco, Mr Uday Pilani, said the company was heading for a 100 per cent rise in profit margin in 2012 to above N3 billion.

According to Pilani “with most of the trees in their plantation now maturing, it is expected that harvest would be unprecedented this year and therefore we are also expecting a corresponding rise in profit.”

“You know the performance of oil palm plantations is heavily dependent on the weather, for example the number of days of rain in the year seriously affects the output of the trees and for this year, we have experienced very many days of rain and this is helping to boost harvest and I can tell you that just half way through the 2012, we have almost surpassed the entire profit made in 2011,” he said.

The company’s board recently approved the payment of N1.00 per share dividend, amounting to N1billlion for the year ended December 31, 2011.

For the period, the company recorded a turnover of N8.536billion, up by 58.48 per cent when compared with N5.4billion attained in the previous year.

Profit after tax also increased by 54.55 per cent, from 1.095billion to N1.692billion while shareholders’ funds stood at N4.691billion as against N3.518billion recorded in 2010.

Chairman of Presco Plc, Mr Pierre Vandebeeck, said the company was reaping the benefits of its expansion programme.

He said: “The performance of 2011 can be described as very good. We achieved a total of fresh fruits bunches production of 109,111 tons as against 87,856 tons in the previous year; crude palm oil produced was 22.936 tons compared with 17,420 tons of the year 2010 and refined, bleached, deodorized oil of 22.936 tons oil.

Speaking on its corporate social responsibilities, Vandebeeck said the company’s host communities’ development programme has been sustained, stressing that the focus has been on education, roads, water and electricity.

The company recently announced plans to raise turnover to N50billion in the next ten years, adding that: “We are certain that by the end 2013, we will be hitting N15billion and in ten years from now pushing towards N50billion annual turnover.

Bridging the Demand-Supply Gap

With a total crude vegetable oil output of almost 23,000 tonnes per year as at today, Nigeria probably needs 15 more outfits, with the scale and expertise of Presco to be able to bridge the widening gap between local demand and supply of vegetable oil and to make the country self-reliant in this crucial sector.

The much-talked-about the Federal Government agriculture transformation agenda, which targets eliminating the almost N1 trillion annual spend on food importation to avert hunger, can only materialise if government actors approach the problem commodity-by-commodity.

 This can be achieved by identifying the specific investments needed in specific sectors to take the country from its current state of food deficit to a point where it does not only meets its domestic food and agro-input needs but also generates an exportable surplus for foreign exchange earnings.

FAST FACTS
- Malaysians came to NIFOR to study oil palm production in 1964 and allegedly took some Nigerian seedlings

- In Nigeria the highest achieved oil palm yield is about 3 tonnes of oil per hectare

- In Malaysia, oil palm yield is about 18.5 tonnes of oil per hectare

- A 300,000 tonnes demand-supply gap exists in the Nigerian vegetable oil market