Earnings report of most consumer goods companies have been soft as Dangote sugar recorded declines in sales as well as its earnings, reported in its nine months results ended September 2018.
The top Nigerian sugar maker saw a decrease in sales by 28 percent to N116.8 billion from N163 billion in nine months ended September. Businessday analysis showed that the fall in revenue was primarily driven by a 29 percent fall in revenue from the sale of 50kg sugar and 14 percent fall in revenue from sale of retail sugar.
“We link this to lower sales volumes, further amplified by the resurgence in smuggling of imported sugar due to improved liquidity in the foreign exchange (FX) market,” analysts at CSL Stockbrokers Limited stated in an email sent to BusinessDay.
“We however note that management has explained that the company is working with regulatory authorities and others in the sugar industry to curtail the influx of poor quality unlicensed sugar into the country. While we view management’s action in a positive light, we do not foresee a significant improvement in revenue going forward.”
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Profit after tax (PAT) for the nine months period declined by 37 percent to N26.5 billion from N16.7 billion recorded a year ago. From the result, the dip in PAT was driven by a huge growth in interest paid on bank loan by 475 percent.
Operating profit likewise dropped by 32 percent to N24.2 billion in the period from N35.9 billion posted in the same period last year.
Meanwhile, operating expenses grew during this period especially selling and distribution expenses as Dangote Sugar reported 65 percent growth which was mostly incurred from costs of transporting goods.
Earnings per share (EPS) declined 25 percent to N1.07 in nine months 2018 compared to N1.43 in 2017.
The third quarter result from July to September revealed the company had a decline in its profit after tax by 58 percent to N3.9 billion from N9.4 billion recorded in the same period a year ago. Revenue dropped by 26 percent which was driven by “weak top line performance”, Analysts said
The company’s expense -to- sales ratio increased to 5.8 percent from 5.3 percent in Q2 and 4.7 percent in Q1. This implied that 6 percent of the company’s revenues are used for operating expenses.
However, the shares of Dangote Sugar Plc was up 7 percent to close at N15.30 at the close of the market on 31st of November 2018. Year to date the shares are down 25 percent.
