Dangote Sugar Refinery (Dangsugar) Plc has released fourth quarter and full year 2016 results at the Nigerian Stock Exchange (NSE) with profit after tax increase to N14.4 billion from N11.2 billion in the corresponding period of 2015.
The company’s result for the period under review showed, group revenue up by 68 per cent to N169.72 billion from N101.06 billion in 2015, while gross profit increased by 12 per cent to N22.98 billion.
EBITDA also up by 12 per cent per cent to N22.18 billion, while Profit before tax increased 21 per cent to N19.61 billion compared to N16.16 billion in 2015.
Earnings per share rose to N1.20 from 93 kobo in 2015, while the board recommended 60 kobo dividend per share verse 50 kobo paid in 2015.
In its operating highlights, the company stated, seasonal sugar production at savannah went up to 17,122 tonnes from 6,610 tonnes in 2015, full year refinery production at Apapa stood at 791,800 tonnes from 740,350 tonnes in 2015, while group sugar sales volume stood at 778,518 tonnes.
Analysts at Cordros Capital said that the 94.5 per cent year-on-year revenue and PAT growth apiece, in the final quarter, summed up an impressive year for the company, wherein top-line grew by 67.9 per cent while post-tax profit increased by 29.2 per cent.
They added that “Further analysis on the company’s result showed that the revenue growth of 94.5 per cent reported during the fourth quarter, on higher-than-expected sales volume. The volume sold during the period 164k tonnes, though ahead of our estimate, was expectedly at record low level considering the magnitude of price increase by 34 per cent implemented during the period.
“Compared to other FMCG companies in our coverage, Dangote Sugar implemented about the highest 70 per cent average price increase over 2016 to prevent the severe naira depreciation and raw materials price increases experienced during the year from eroding margins.”
According to the analysts, gross margin fell sharply to 7.3 per cent, as the price increase mentioned above trailed the 39 per cent increase in cost per tonne. Raw materials cost (+46% q/q per tonne) was the biggest driver of the increase in per tonne cost, reflecting both the increase in the international price of raw sugar from the third quarter and the continued slippage of the Naira exchange rate at the alternative markets.
“A significant surge in depreciation charge, the highest during the year was also responsible for the shrinkage in gross margin. Operating expenses was down 0.5% y/y, but was the highest consistent with the historical trend in all quarters of the year. But thanks to the huge price-driven revenue growth, the opex/revenue ratio was maintained at four per cent. Below the EBIT line, fair value adjustments came in at N1.82 billion, similar to Q4, 2015, and had a major positive impact on PBT. The fair adjustments relate to the revaluation of the sugar cane plantations”, they hinted.
They also added that below PBT, a significantly lower effective tax rate of 0.4 per cent verse 34 per cent average in nine month, 2016 and five per cent in fourth quarter, 2015 had positive feed-through to PAT, just as they pointed out that the management of the company claims to have had a strong start to 2017, capturing market share from competitors and smugglers.
“It expressed optimism in the ability of the strengthening naira to eliminate the challenges of sourcing FX. Risk, however, is that raw sugar prices remain volatile in the international market and subsequent appreciation could more than offset gain from a stable Naira exchange rate,” they said.
Speaking on the company performance for the period, the acting Group Managing Director of Dangote Sugar, Abdullahi Sule said, “We are very pleased with the results for the period under review, our revenue grew by 68 per cent and improve sales volume compared to 2015 despite the current macro-economic challenges. Our focus in the current year and for the future remains leveraging our strengths to maximise every opportunity to generate sales, increase our market share and create sustainable value for our stakeholders. Concerted efforts are being made towards the actualization of our BIPs plan.
Sule added that “the implementation strategy has changed and the full focus is now on the expansion of the Savannah Sugar Estate to its full potentials, and development of the new site at Tunga in Nasarawa State.”
Dangote Sugar is Nigeria’s largest producer of household and commercial sugar with 1.44 million tonnes of refining capacity, with the ability to supply most of the country through an extensive network of distributors. Our refinery at Apapa imports raw sugar from Brazil and refines it into white, Vitamin A fortified sugar suitable for household and industrial uses. Our Savannah cane sugar factory located near Numan, in Adamawa State has an installed factory capacity of 50,000 tonnes. Covering 32,000 hectares in extent, the Savannah estate has considerable opportunity for expansion which is underway.
The company’s strategy is to become a global force in sugar production, working within Nigeria’s National Sugar Master Plan to end importation and sell more than 1.5 to 2.0 million metric tonnes of locally produced sugar in Nigeria and neighbouring countries.
As part of this plan Dangote Sugar acquired Savannah Sugar in December 2012 and are currently improving its farm acreage and upgrading its production facilities.
The company intend to augment Savannah’s 32,000 hectares in Adamawa state by acquiring and planting a further 150,000 hectares across Nigeria, supporting the new plantations with modern production facilities that are located closer to the consumer.
Dangote Sugar Refinery was spun out of Dangote Industries in 2006 and was listed on the Nigerian Stock Exchange (NSE) in March 2007.