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Dangote Sugar Plc: Crippled by huge finance costs
Introduction
The performance of Dangote Sugar Plc for the 2023 financial year was worse than that of 2022. While the company was able to step up the level of its income generation slightly, a disproportionately huge increase in indirect costs and finance costs left the company with a pre-tax loss instead of a profit.
Profit margin, return on assets, return on equity, and pre-tax profitability per employee, and other ratios were thus worse than those of the previous year, and were also subpar when compared with those of its competitors for the same financial year.
Growth indices
Dangote Sugar saw a 9.5 percent growth rate in its gross earnings for its 2023 FY. Gross earnings rose to an all-time high of N441.45 billion, up from N403.25 million in the preceding year. This growth rate was lower than the 46.1 percent growth rate achieved in the erstwhile year. Direct costs grew by 14.1 percent to N355.1 billion in the course of the year from N311.28 billion.
However, the company’s non-direct costs grew much more rapidly, by as much as 631 percent to N73.78 billion from a mere N10 billion in the prior year.
Finance costs also swelled to N201 billion from N9.8 billion in the prior year. The combination of the intense growths in non-direct costs and finance costs left the company with a pre-tax loss instead of a profit.
Pre-tax loss for the year was N107 billion, while after tax loss was N71.9 billion.
These losses would have a negative effect on the company’s profitability ratios for the year.
Total assets deployed by the company for the 2023 year grew to N601.04 billion, 22.4 percent more than the N490.97 billion assets deployed in 2022, while shareholders’ funds declined by 52.4 percent to N81.81 billion.
Profitability ratios
The 2023 financial year was not a profitable one for Dangote Sugar, as the profitability ratios recorded were in the negative. First, there was no profit margin, rather a loss margin. The result for the year was negative 24.3 percent in 2023, as compared to a positive 20.3 percent in 2022. What this means is that there was a resultant N24.30 loss for every N100 earned by the company in the course of the year. This was as compared to a profit of N20.30 in the prior year.
Also to record a regression was return on assets (ROA). ROA was negative 17.8 percent in 2023, down from a positive 16.7 percent in the erstwhile year.
For the 2023 financial year, Dangote Sugar deployed equity valued at N81.81 billion and for every N100 equity deployed, the company recorded an after-loss profit of N88.00, a terrible outcome when this is compared to an after-tax profit of N31.60 in the preceding year.
Staff matters
The company did not do well regarding its employees for the year ended December 31 2023. Instead of a pre-tax profit per employee, there was a pre-tax loss per employee of N36.98 million on the average. This is as compared to the N29 million employees contributed on the average to the company’s pre-tax profit in 2022 and the N12.41 million they did in 2021.
On the other hand, the company spent more on its employees in 2023. Average staff cost rose to N2.53 million from N2.21 million within the course of 12 months. This means that there was a N320,000 addition to what an employee earned (on the average) between 2023 and 2022.
Despite the fact that it upped its staff costs, Dangote Sugar did not incur a higher proportion of staff costs as a proportion of income earned. Staff costs as a portion of turnover was 1.7 percent in 2023, same as it was in the prior year.
Staff costs per employee and staff costs as a proportion of turnover were low enough to be highly competitive and we commend Dangote Sugar for that. However, the loss it made for the year clouded its employees’ ability to contribute to its profit, as evidenced by the negative pre-tax profit per employee.
Other ratios
At 0.8 times, Dangote Sugar’s current ratio did not compete favourably against the industry average for 2023. What this means is that for every N1.00 of short-term obligations, the company had only 80 kobo in short-term assets, and was not fully able to meet short term debts from short term assets.
Having a debt-to-equity ratio of 6.3 shows that the company used N6.30 of liabilities in addition to each N1.00 of stockholders’ equity. In other words, the company used N7.30 of total capital for every N1.00 of equity capital.
Dangote Sugar Vs NASCON: NASCON better
Not only is Dangote Sugar’s 2023 annual results not laudable in its own stead, but the company’s results also did not fare competitively in the food/beverages & tobacco sector for the 2023 FY. We compared its results with that of its sister company, National Salt Company of Nigeria (NASCON). It is important to note that both companies are subsidiaries of Dangote Industries.
While Dangote Sugar is the bigger of the two companies in terms of volume of sales, NASCON was more profitable than Dangote Sugar when it comes to profitability ratios.
Turnover growth rate
For the 2023 financial year, Dangote Sugar had a turnover growth rate of 9.5 percent, as compared to NASCON’s turnover growth rate of 37.5 percent for the same period under review. Analysis shows that NASCON was the winner in this respect.
Pre-tax profit growth rate
Dangote Sugar recorded a loss before tax in 2023, such that it had a negative pre-tax profit growth rate of 230.8 percent. This is much worse than the 146 percent growth rate that NASCON did. NASCON was thus the winner in this respect.
Between turnover and profit
For the 2023 financial year, pre-tax profit margin (which measures a company’s ability to squeeze as much profit as is possible from turnover) for Dangote Sugar was negative 24.3 percent, worse than NASCON’s pre-tax profit margin of 25.5 percent.
Return on equity
Analysis shows that while every N100 worth of equity deployed by Dangote Sugar led to an after-tax loss of N88, such N100 equity deployed earned NASCON N50 as after-tax profit. This makes NASCON the winner in this respect.
Return on assets
ROA for Dangote Sugar was negative 17.8 percent, down from a positive figure of 16.7 percent in the prior year. This means that of every N100 worth of assets deployed by Dangote Sugar, there was a resultant N17.80 loss. Meanwhile NASCON recorded a N24.60 pre-tax profit from every N100 worth of assets employed.
Conclusion
Dangote Sugar’s negative profitability ratios is not reason enough to dismiss it forever. While the company did indeed drop the ball when it comes to profitability, the hope is that it will turn around its circumstances in the 2024 FY.
News
Cement price hike causing building collapse – COREN
Cases of building collapse in the country have been attributed to the arbitrary increase in the price of cement by producers of the product.
The President of the Council for the Regulation of Engineering in Nigeria, Sadiq Abubakar, stated this on Monday in his remarks at the investigative hearing organised by the House of Representatives Joint Committee on Solid Minerals, Industry, Commerce and Special Duties, to probe the price increase of cement in recent times.
This was as the Chairman of the Joint Committee and member representing Karu/Keffi/kokona Federal Constituency, Nasarawa State, Gaza Gbewfi, summoned the Chairman of the Cement Producers Association of Nigeria, David Iweta, for questioning over the development.
Iweta, who did to turn up for the investigative hearing on Monday, was summoned after previously turning down two invitations by the committee.
The committee also charged the association to desist from using frivolous court injunctions to interfere in its work as guaranteed by the provisions of the 1999 constitution (as amended)
“You will agree with me that an increase in the price of cement is one of the key culprits of building collapse. I am trying to connect the hike in the price of cement with the standardisation in our building and the direct connection of building collapse.
“There is a connection with that, and I think this something we must interrogate,” the COREN President said.
Gbewfi, while agreeing with Abubakar, also argued that the cost of cement has also brought about an increment in housing rents across the nation.
“Anything that has to do with livelihood should be treated as an emergency’” the committee chairman said.
At the investigative hearing, the joint committee also queried representatives of the Nigeria Building and Road Research Institute and the Federal Competition and Consumers Protection Council on the arbitrary price increase.
Gbewfi also chided the representative of the Chief Executive Officer of the FCCPC, Boladale Adeyinka for not doing enough to protect the consumers of cement in line with the Act establishing the agency, saying, “You are a mother that has forgotten your children.”
News
Osun State Assembly okays salary increase for political office holders
The Osun State House of Assembly is to send a bill to Governor Ademola Adeleke to increase the salary package of some political office holders.
This was made known by the Speaker of the Assembly, Adewale Egbedun, during plenary on Monday.
The News Agency of Nigeria reports that the salary increment bill titled, ‘Osun State Public/Political Office Holders Reviewed Remuneration Package (Amendment No. 2) Bill 2024,’ was presented to the Assembly on April 30, 2024.
The Majority Leader and the lawmaker representing Ede North State Constituency, Kofoworola Adewunmi, presented the bill to the House as a private member bill.
While reading the policy thrust of the bill, Adewunmi stated that the last time the salaries of public/political office holders in the state were reviewed upwards was in 2007.
He said the salaries stipulated for public office holders in the Osun State Public/Political Office Holders Remuneration Package Law 2007 was, however, no more in tandem with the current economic realities.
“You will agree with me that the current economic reality is not the same as what was obtainable 17 years ago when the law was passed.
“It has, therefore, become imperative to review upwards, the salaries of some public/political office holders to better their living standard which is in tandem with the five points agenda of Governor Ademola Adeleke.
“In addition, the State Assembly resolution taken on May 8, 2008 wherein there was an upward review of the remuneration package of some public/political office holders not covered by Revenue Mobilisation, Allocation and Fiscal Commission, as proposed by the state government, has been further reviewed and subsumed under this bill.” he stated
He equally clarified that the salary increment didn’t affect or cover the lawmakers’ salaries, explaining that state lawmakers’ salaries are statutorily reviewed by the National Assembly.
News
Minimum wage: Labour issues two-week ultimatum to defaulting states
The organised labour comprising of the Nigeria Labour Congress and Trade Union Congress, on Monday, ordered state chapters to issue two weeks ultimatum to states that have failed to implement the old N30,000 minimum wage.
The NLC and TUC took this decision during a jointly held National Executive Council meeting which took place on Monday.
“NEC-in-session further directed all state councils whose state governments are yet to fully implement the N30,00 national minimum wage and its consequential adjustments to issue immediately a joint two-week ultimatum to the culpable state governments to avert industrial action,” NLC’s National President, Joe Ajaero; and TUC’s National President, Festus Osifo, said in a statement.
Speaking further, the unions also called for a one-day action in Anambra State following what was described as the failure of the state government to meet the demands of civil servants in the state.
“Consequently, the NEC-in-session accordingly reaffirms the NLC and TUC joint ultimatum earlier issued to the Anambra State Government by its Anambra State councils. It therefore directed all affiliates and workers in the state council to mobilise their members to ensure a successful action in the event the state government fails to meet the demands of workers by Thursday, the 23rd of May, 2024.
“In the event that the government fails to meet the demands outlined within the stipulated timeframe, the NEC authorises the leadership of the NLC and TUC to take appropriate actions, including but not limited to the mobilisation of workers for peaceful protests and industrial actions, to press home these demands for social justice and workers’ rights.
“NEC therefore calls on all affiliate unions, and workers including Civil Society Organisations across Nigeria to remain united and steadfast in solidarity during this critical period. Together, we shall prevail in our pursuit of a fair and just society that guarantees the dignity and well-being of all its citizens,” the statement added.
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