Dangote Sugar records N9.33 billion after tax profit

Dangote Sugar Refinery Plc, Nigeria’s biggest producer of the sweetener by market value, recorded a profit after tax of N9.33 billion in the third quarter of the year amid lower production volumes and persistent distribution challenges.

The N9.33 billion profit recorded in the first nine months through September 2015 represents 1.3 percent increase from N9.14 billion recorded last year.

An industry analyst who wouldn’t want his name mentioned said the company has demonstrated resilience and perseverance despite harsh operating environment as sales volumes were constrained by depressed market conditions.

The company said recently that it is grappling with disruption to the supply of natural gas to the Apapa Refinery as well as currency depreciation and security challenges in the north of the country.

Apart from the devaluation of the naira that has spiraled up cost of imported raw materials for fast moving consumable goods firms, the imposition of foreign exchange restrictions by the central bank  made  it difficult for Dangote Sugar to access dollars in time to meet its obligations.

While the naira remains fixed between N198 and N199, inflation reduced by 0.1 percent to 9.3 percent, above the CBN target point limit according to NBS data.

Dangote Sugar’s sales fell by 1.01 percent to N73.04 billion in September 2015, as against N73.79 billion in the previous period.

Despite some of the aforementioned challenges, Dangote Sugar was cost effective as cost of sales fell by 3.02 percent to N5.27 billion in 2015 as against N5.96 billion last year.

Operating expenses were down by 6 percent to N3.91 billion in 2015 as against N4.16 billion the previous year.

The producer of the sweetener is spending less to produce each unit of product as cost of sales ratio reduced to 74.30 percent in the period review as against 75.36 percent earlier.

Dangote Sugar is Nigeria’s largest producer of household and commercial sugar with 1.44 million tons of refining capacity and the company is working within Nigeria’s National Sugar Master Plan to end importation and sell more than one and a half million tons of locally produced sugar in Nigeria and neighboring countries.

Nigeria currently consumes some 1.3 million metric tons (MMT) of sugar annually but produces only 30,000 – 50,000 tons, which is less than 5 percent of its annual consumption.

The huge supply gap is bridged through imports of sugar mainly from Brazil.

“We believe top line growth is likely to be hindered by comparatively lower y/y sales volumes, despite higher prices on average this year,” said Uwadiae Osadiaye an analyst in an emailed note to clients.

“In Q4, we expect to see a moderate q/q contraction in gross margin (to 22.7%) given the reduction in sugar prices to N5,750 per 50kg bag from N8,000 and rising raw sugar prices (a key raw material), which were up 30% over the last three months,” said Osadiaye.

Dangote Sugar’s share price closed at N6.05 on the floor of the exchange while market capitalization was N73.25 billion.

BALA AUGIE