Dangote Sugar Refinery’s Q3 performance in 4 metrics

Despite input costs claiming 82 percent of Dangote Sugar Refinery’s revenue in the third quarter (Q3) of 2022, the sugar producer showed its tenacity by reporting a 61.86 percent increase in its revenue during the period to N102.86 billion, the highest it has reported in six (6) years.

As a result, its profit for the period after tax deductions grew by 57.73 percent to N4.59 billion in the third quarter of 2022 from N2.91 billion in the corresponding quarter of 2021.

Below are four (4) metrics that depict its financial performance in the third quarter of 2022.

Profit Margin

Dangote Sugar Refinery’s profit margin for the period, the amount of net income or profits it generates from sales revenue, declined by 12 basis points to 4.46 percent in the third quarter of 2022 from 4.58 percent in the corresponding quarter of 2021, making it the lowest profit margin reported in six (6) years.

This indicates that the firm is making less money per naira of sales and can be the result of a lower sales price or higher cost, or both.

A further look into the financial statement of the sugar producer shows that its cost of sales increased by 52 percent in the third quarter of 2022 to N84.25 billion from N55.39 billion in the third quarter of 2021 on the back of rising prices in raw materials.

OPEX Margin

The operating expenses (OPEX) margin or ratio reported by Dangote Sugar Refinery hit its lowest in six (6) years at 2.84 percent in the third quarter of 2022, 196 basis points lower than 4.80 percent in the same quarter of 2021.

The operating ratio shows how efficient a company’s management is at keeping costs low while generating revenue or sales. Therefore, the decline in the OPEX ratio for Dangote Sugar Refinery indicates that the company is more efficient at cutting costs while generating revenue.

Furthermore, operating expenses reported by the sugar producer declined by 4.26 percent to N2.92 billion in the third quarter of 2022 from N3.05 billion in the corresponding quarter of 2021.

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EBITDA Margin

Dangote Sugar’s earnings before interests, taxes, depreciation and amortisations (EBITDA) increased by 97.38 percent to N24.10 billion in the third quarter of 2022 from N12.21 billion in the third quarter of 2021, therefore bringing the EBITDA margin to 23.43 percent during the period.

Its EBITDA margin during the period was 422 basis points up from 19.21 percent in the third quarter of 2021, thereby providing investors with a snapshot of short-term operational efficiency.

The EBITDA margin grew on the back of declining operating expenses and an 80 percent increase in other incomes which amounted to N61.63 million in the third quarter of 2022 from N34.18 million in the corresponding quarter of 2021.

Earnings Per Share

Dangote Sugar’s earnings per share dropped to its lowest in six (6) years to N0 per share in the third quarter of 2022 from N0.24 per share in the corresponding period of 2021.

Lower or decreasing EPS gives a poor indication of the health of the company and gives lower returns to the shareholders.