Business

Dangote Sugar Refinery: Another year of fundamental revenue, profit growth

Dangote Sugar Refinery’s latest unaudited account shows increased revenue and profitability that highlights increased fundamentals of the sugar refinery company listed on the Nigerian Stock Exchange (NSE).

The company’s nine-month report for the 2017 financial year shows exceptional growths in revenue and profit. The ability to push revenue has added a new momentum to the company’s operations.

The company recorded resound growth in revenue but competed with cost of sales as prices of materials skyrocketed in the period under review.

The company has successfully restructured its operations, taming costs and strengthening revenue, thereby stretching out margins and reinforcing profit capacity.

Unaudited report and accounts of Dangote Sugar Refinery’s nine months ended September 30, 2017 recorded 41.5 per cent increase in revenue while profit before tax and profit after tax increased by 156.2 per cent and 145 per cent respectively.

The increased profit after tax dragged the group’s Earning Per Share (EPS) up by 163 per cent as its moved from N8.4 to N2.21 per share.

The company’s profitability ratio recorded growth performance in profit margin among others ratios considered following a resound performance in profit and loss figures.

Dangote Sugar Refinery currently is the largest Sugar Refinery Company in the country and on NSE with a market capitalisation of N262.2 billion and outstanding share of 12billion and trades at a share price of N21.85 as at January 5, 2018.

Dangote Sugar Refinery outperformed the market, with a year-on-year return of 227.33 per cent, to close at N20.

The company distributes refined sugar to major cities in North, East, West and Lagos.

 

Increase in revenue matches profits

Dangote Sugar Refinery grew its revenue by 41.5 per cent to N163 billion from N115 billion recorded in nine months of 2016.

There is a single customer that buys industrial non-fortified sugar that represents 10 per cent of Dangote Sugar Refinery revenue. In addition, there are leading blue chip companies in Nigeria that include manufacturers of confectioneries and soft drinks that contribute 30 per cent of the company’s revenue.

The breakdown in revenue revealed that Revenue from the sale of 50kg pack gained 41.4 per cent to N156 billion from         N110.4billion reported in nine months of 2016 while Revenue from the sale of sugar-Retail moved from N2.49 billion to N3.76 billion in nine months of 2017.

Also, Revenue from the sale of molassels close nine months of 2017 at N560 million, from N91.7 million, while Freight Income rose by 16 per cent to N2.5 billion from N2.23 billion reported in nine months of 2016.

Cost of sales remains a challenge, which grew half of revenue and claimed an increased share of sales at 74.6per cent at the end of the nine months of 2017 against 83.5 per cent in the same period in the prior year.

Cost of sales gained 26.3 per cent to N121.6 billion from N96.25 billion in nine months of 2016 to leverage on an increase of 118.3 per cent in gross profit to N41.5 billion in gross profit from N19 billion reported in nine months ended September 30, 2017.

That increased gross profit margin from 16.5 per cent to 25.4 per cent between the two periods.

Total operating expenses that include distribution/administrative expenses grew by 14 per cent to N5.3 billion and could not afford the company a reasonable cost saving.

Operating Profit thus gained 147 per cent to N36.36 billion from N14.7 billion in prior nine months of 2016 while finance Cost gained 8.1 per cent to         N427million from N395 million.

The company’s cost management success has also registered in the area of interest expenses. Interest expenses recorded a growth from about N263.8 million to N398.9 million over the review period.

The developments that lifted profit performance include a major increase operating profit, marginal increase in finance cost and growth in revenue.

With the new strength in earnings growth and only a slight increase in finance expenses, Dangote Sugar Refinery has stretched out profit margin and improved profit capacity. Net profit margin has improved from 4.5 to about 7.8 per cent over the review period.

Profit Before tax gained significantly by 156.2 per cent to N39.25 billion as against N15.3 billion reported in nine months of 2016.

Tax income for the period increased by 145 per cent to N12.7 billion to leverage on Profit after tax that amounted to N25.6 billion for Dangote Sugar Refinery at the end of the nine months from N10.1 billion prior nine months.

The full year profit outlook has improved significantly from the first quarter-based forecast.

Stronger Assets quality driven by drop in liabilities

Dangote Sugar Refinery’s total assets rose by five per cent from N178.4 billion in 2016 to N188 billion in nine months of 2017.

Non-current assets moved from N64.9 billion to N65.2 billion while current assets grew by eight per cent from N113 billion to N122.8 billion recorded in 2016 finance year.

Total liabilities for the period dropped by three per cent to close at N108.6 billion in nine months of 2017, below N112 billion recorded in full year ended 2016.

Both long-term liabilities and Short-term liabilities recorded marginal drop in nine months under consideration.

As long-term liabilities remained flat at N12.5 billion, short-term liabilities dropped by four per cent from N99.7 billion in 2016 to N96.2 billion in nine months of 2017.

Shareholders’ funds increased by 20 per cent from N66.15 billion to N79.47 billion as working capital gained 94 per cent to N26.7 billion as against N13.7 billion reported in 2016.

The Acting Group Managing Director Abdullahi Sule, had said, “Our focus for the remainder on the year will be to increase sugar production at reduced conversion cost and improve distribution to match the increasing demand from our customers.

“Our greater growth strategy “Sugar for Nigeria” continues to gain momentum as we execute the first phase of our expansion plans.”

He added, “The various operational and economic challenges we were faced with during the period under review notwithstanding, the overall performance shows an improved outlook for the period. Operating cost increased due to the devaluation of the naira.”

Dangote Sugar is Nigeria’s largest producer of household and commercial sugar with 1.44 million tonnes of refining capacity, with the ability to supply most of the country through an extensive network of distributors.

The Group’s refinery at Apapa imports raw sugar from Brazil and refines it into white, Vitamin A fortified sugar suitable for household and industrial uses while Savannah cane sugar factory located near Numan, in Adamawa State has an installed factory capacity of 50,000 tonnes. Covering 32,000 hectares in extent, the Savannah estate has considerable opportunity for expansion.

 

 

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