• Monday, March 04, 2024
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Dangote Sugar: Better than expected H1 results


Dangote Sugar Refinery plc released its half-year (H1) results at the Nigerian Stock Exchange (NSE) with reported group revenue increase to N51.120billion from N49.601billion in the corresponding half-year (H1) period of 2014.

Dangote Sugar Refinery Company plc (DSR) commenced operations as a sugar refiner in March 2000. The sugar refining plant was commissioned in 2001, with an initial capacity of 600,000 metric tonnes (MT) per annum (p.a). Dangote Sugar Refinery is one of the largest sugar refineries in the world with a capacity of 1.44million MT p.a. 

Analysts at FBN Capital said DSR present energy mix, which is heavily skewed to the more expensive fuel oil, weighs on profitability. The company’s cost of sales rose to N38.417billion against N36.642billion in H1’14. Its distribution/administrative and other expenses declined to N2.632billion from N2.925billion.

“We expect that the completion of the rehabilitation of gas delivery lines will lead to higher gas utilisation and improve earnings on a y/y basis. We also expect DSR to continue to benefit from soft raw sugar prices. According to Bloomberg estimates, global raw sugar prices are likely to average around $0.12/lb through 2015 down by around 25percent year-on-year (y/y). We estimate both sales and EPS in 2015E to rise by around 12% y/y. Key risks to our outlook are higher opex levels and a spike in raw sugar prices”, the analysts noted.

In the half-year to June 30 2015, Dangote Sugar Refinery plc reported H1’15 profit before tax (PBT) of N9.802billion as against N10.263billion in same period of 2014. Its profit after tax (PAT) stood at N6.311billion against N6.835billion in H1’2014. In the same H1’15 period, the company’s basic earnings per share (annualised) was 105kobo against 114kobo in H’14.

DSR plc financial charges for the half year 2015 increased to N361.645million from a low of N74.911million in H1’14. 

The company currently employs the talo-phosphatation and ion exchange resin technologies to purify sugar to internationally accepted quality standards. DSR sugar refinery is located in Lagos, at Nigeria’s largest port the Apapa Wharf. DSR controls a dominant market position in the sugar refining sub-sector of the Nigerian food & Beverage Industry.

The company’s operations comprise two key business areas: refining of raw sugar imported from Brazil; and marketing and distribution for direct consumption and industrial needs. In compliance with the National Agency for Food, Drug Administration and Control (NAFDAC) policy, which makes the fortification of staple foods mandatory in Nigeria, Dangote Sugar Refinery plc produces and packages Vitamin A fortified refined white sugar in 1kg, 500grams, 250grams and 50kg bags for direct consumption under the brand name “Dangote Sugar”, as well as the unfortified white sugar for industrial use.

Dangote Sugar Refinery plc was listed on the main board of the Nigerian Stock Exchange (NSE) on 18th March, 2007. With more than 102,000 shareholders as at 31st December, 2014,

It is one of the thirty (30) most capitalised companies listed on the NSE. Listed on the food products subsector of NSE consumer goods sector, Dangote Sugar Refinery Company plc has a market capitalisation of N72billion and shares outstanding of 12 billion units. As at last Monday, the company’s share price was N6. 

“Dangote Sugar Refinery’s (DSR) Q2 2015 results came in better than expected due to a combination of higher prices year-on-year (y/y), lower opex and improving sugar sale volumes. Although higher fuel costs and FX volatility offset some of the benefits which accrue from relatively soft raw sugar prices (DSR’s key raw material), we believe that higher y/y sales of around 7percent in H2, driven by the resumption of cross-border trade in northern Nigeria, will support earnings,” Uwadiae Osadiaye led team of analysts noted in their view on Dangote Sugar Refinery half-year results.

Accordingly the analysts said they have raised their Earnings Per Share (EPS) forecasts for Dangote Sugar Refinery plc by around 8 percent “on average over the 2015-16E period.”

“Our new price target of N6.8 is up by 12% as we have rolled forward our valuation to 2016. Our new target implies a potential upside of 13% from current levels. DSR shares are trading on a 2015E P/E multiple of 5.9x for a 7% growth in EPS in 2016E. Ytd, DSR shares have declined -5.5%, outperforming the NSE ASI’s by around 4%. We retain our neutral rating on the stock,” said the analysts at FBN Capital.

Iheanyi Nwachukwu