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Dangote Sugar H1 revenue declines on gas supply shortage

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IMAGE: Dangote Sugar Refinery, »


Fast moving consumable goods company, Dangote Sugar Refinery (DSR), has had its first half (H1) revenues decline on gas supply shortage, analysts say.

For the first six months of the year, the company’s revenue fell by 9.86 percent to N49.60 billion, from N55.03 billion the same period of the corresponding year (HY) 2013.

The decline in sales is explained by a plant upgrade that lasted two weeks in May, according to FBN Capital, in a note released on August 7.

“It was also affected by gas supply disruptions for another two weeks in June, low pour fuel oil (LPFO) provided an alternative energy source during that period,” said Uwadiae Osadiaye, analyst at FBN Capital.

The bottom-line also slowed as a result of the internal challenges confronting the company.

Profit before tax (PBT) reduced by 5.43 percent in HY 2014, to N10.26 billion compared with N10.85 billion as of HY 2013.

Profit after tax (PAT) also slid by 2.56 percent to N6.83 billion, as against N7.01 billion as of HY 2013.

Nigeria’s biggest producer of the sweetener with 70 percent share of the market plans to almost double refining capacity to 2.75 million metric tons by 2017, as it expands its Lagos plant.

The future is stellar for the industry as the Federal Government last year removed duties on imported machinery and spare parts for sugar processing companies.

It also granted a five-year tax exemption for sugarcane to sugar investors and imposed import duties of 60 percent on raw sugar, and 80 percent on refined sugar.

The usage of relatively more expensive LPFO resulted in cost margins increasing to 73.87 percent in 2014, from 71.96 percent in 2013, while gross margin reduced to 26.13 percent in 2014, compared with 28.01 percent in 2013.

Net margin, a measure of efficiency and profitability, remained flat at 13 percent.

Operating expenses margin (OPEX margin) reduced to 5.88 percent in 2014, from 11.93 percent in 2013, while operating expenses reduced by 55.55 percent to N2.92 billion.

The FBN Capital also went further to say that the 2014/2015 harvesting season for Savannah Sugar Company (SSC), DSR’s first farm project, is likely to be slightly delayed till January 2015, as management plans for improved sugarcane yields.

The company’s share price closed at N9 – August 12, on the floor of the Nigerian Stock Exchange, while market capitalisation closed at N108 billion.

“We believe management’s end 2015 break-even target is achievable. In the short term, we expect a recovery in earnings in Q3 2014,” said Osadiaye.

Article Credit: Businessdayonline

Updated 4 Years ago

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Tags:     Dangote Sugar Refinery     FBN Capital     LPFO     Savannah Sugar Company