Dangote Sugar Refinery (DSR) Plc’s unbroken nine quarter revenue growth streak shows no sign of slowing this year as the largest sugar refiner continues to increase market share while creating sustainable value for shareholders.
The company’s sales and profit topped estimates in the first quarter and analysts expect a stellar performance in the third quarter results, reinforcing a message to investors that focused strategy and market penetration are winning formulas.
Second-quarter sales increased 68.40 percent to N118.67 billion. Net income was surged by 131.68 percent to N17.10 billion, the company said in a statement. Analysts estimated profit of N16.80 billion and revenue of N117.67 billion, according to data compiled by BusinessDay.
Dangote Refinery’s share price has risen by 137.32 percent since the beginning of this year, outperforming the All Share Index (ASI).
The company’s net margin increased to 14.40 percent in June 2017 as against 10.40 percent of June 2016; operating profit margin rose to 19.89 percent in June 2017 as against 16.60 percent the previous year.
Gross profit increased to 22.65 percent in the period under review from 19.37 percent the previous year despite a surge in cost of production.
Analysts say the share price of the consumer goods giant could appreciate further on the back of improved profit margins.
Dangote Sugar plans to raise N21 billion from the capital market in order to fund its backward integration project and actualize its sugar master plan.
The company has plans to produce 1.50 million tonnes for refined sugar from locally grown sugar cane by 2023. It has committed about N101 billion to the backward integration plan.
The company said it will require N106 billion to fund the project, 20 percent of which will be raised through equity issuance while the remaining will be raised from the debt market.
Analysis of the books of the firm shows that is lowly geared, which means it is in a pole position to successfully raise the needed debt capital. Less than 1 percent of its total capital comes in the form of borrowing this year and there were no long-term debt in its balance sheet the previous year.
Trade and other receivables, which comprise, money owed to suppliers of raw materials or short-term creditors, spiked by 168.22 percent to N99 billion,.
Due to shortages of gas at the factory that forced it to switch to high energy Low Pour Fuel (LPFO) as increases in prices of raw material, and foreign exchange challenges, pushed up the company’s cost of sales by 62.30 percent to N91.78 billion.
The Federal Government through the Nigeria Sugar Master Plan (NSMP) that it introduced in 2012, aims to make the country self- sufficient in sugar production by 2020.
Nigeria spends over $100 annually to import sugar, according to Godwin Emefiele, the country’s central bank governor,
Dangote Sugar’s shares shed 2.47 percent to close at N14.28 of close of trading on Tuesday, valuing it at N174 billion.
BALA AUGIE
