Nairametrics| At the Annual General Meeting (AGM) for Dangote Sugar Refinery, chairman of the company, Aliko Dangote, stated his intentions to complete backward integration projects by the company in one year. The company has so far, spent N101 billion on the projects so far. One of the major causes of the delay in the take-off of the projects has been difficulties in the process of land acquisition.
There are several reasons for the haste to complete the projects. The price of raw sugar, which is the major raw material in its operations, hit a four year high in 2016, and has shown no signs of dropping. This has led to an increase in production costs. The poor economic conditions in the country means the company may be unable to pass the full costs to its customers. Depreciation of the Naira against the dollar, and difficulties in accessing foreign exchange also lead to an increase in costs for the company. 90% of the company’s production volumes were produced in its Apapa refinery, which means the raw sugar was imported. Cost of sales for the company jumped massively from N80 billion in 2015 to N146 billion for the period ended December 2016.
All the projects involved are located in the Northern part of the country. The progress in the fight against Boko Haram has led to better security, which means an improved environment for trade and commerce. Speeding up the projects, would enable the firm generate returns for them. Not moving fast, may give room for other competitors to take its market share.
The projects are also a source of extra income. A power plant on one of the projects will sell extra power to the national grid. Mollasses and by products from the production of sugar can be used to produce fertilizer. Year to date, the stock has gained 1.47%, beating the all share index and other stocks in the Dangote group all down negative.