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Dangote Sugar blames weaker than expected Q2 earnings on smugling and Apapa Gridlock

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Sugar Surge in Nigeria

Dangote Sugar Plc has blamed its weak 2018 Half year results on a combination of smuggling of unlicensed sugar and the bad roads in Apapa for its weaker than expected results.

The company reported a pre-tax profits of N11.5 billion for the quarter ending June 30th 2018 a 37% drop from the N18.2 billion posted in the same period in 2017. Topline revenue also dropped 27% to N42.9 billion for the quarter.

According to a press release by the company, the influx of smuggled sugar has severely affected their market share and competitive pricing leading to a cut in prices.

The decline in sales volumes was due mainly to the continued presence of lower quality, unlicensed sugar being smuggled in to the country and sold in key markets. It provides a ready alternative to trade Customers who are not mindful of the quality implications of the product. Due to its lower price, it continues to exert a downward pressure on prices and sales volumes. Year on year there has been a reduction in the average selling price (currently ₦13,160/50kg bag vs ₦16,170/50kg bag in 2017) as the impact by the downward trend in global sugar prices comes through.

The company also blamed the gridlock at the Apapa areas as a major reason for lower sales volumes.

Also, the Apapa access road traffic gridlock has had an adverse impact on our logistics and product distribution activities. Group revenue decline by 29.2 % was as a result of the decline in sales volume and price. Gross margin % however showed a year on year improvement due to the positive impact of raw sugar purchases and efficiencies in energy utilisation.

The Managing Director of the company also weighed in admitting the challenges faced by the company in the period under review.

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Though we maintained our market leadership position in the sugar sector, the period under review was very challenging due to the impact of unlicensed sugar being sold in key markets nationwide , and logistics challenges brought about by the Apapa Access Road traffic gridlock.

Despite the se challenges we continued to focus on increasing our refining and production efficiency, energy and cost saving projects and the relentless implementation of our Sugar Backward Integration Projects plan.  We are confident that these actions will transform our business into a stronger, profitable and sustainable concern despite the tough opera ting environment.

The company also reported a drop in revenues in the first quarter of 2018 a situation which it blamed on its decision to cut sugar prices as global raw material sugar prices dropped. The latest admission by the company sheds a dark cloud on the company’s earnings guidance for the rest of the year. The second and fourth quarter are typically strong periods for the company as earnings per share are typically higher.

At an earnings per share of 62 kobo this quarter, Dangote Sugar’s trailing earnings per share has now dropped from N3.36 to N2.95 per share between Q1 2018 and Q2 2018 respectively. The company’s share price closed flat at N17.7 at the close of trading on Monday. It dropped from N19.5 on Thursday to N17.7 on Friday.

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DOWNLOAD DANGOTE SUGAR PLC H1 2018 RESULTS

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Business

HealthPlus crisis: Alta Semper directors reported to Police for trespassing

HealthPlus has made a formal complaint to the Police following its ensuing battle with Alta Semper.

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HealthPlus crisis: Alta Semper directors reported to Police for trespassing

Nigerian Pharmacy Chain, HealthPlus Ltd which is in a battle for control with private equity firm Alta Semper Capital took a new twist as Health plus reported Alta Semper directors to the police last week, as observed in a document seen by Nairametrics.

In a letter sent to the Assistant Inspector General of Police on the 25th of September, HealthPlus stated, “We had the presence of unknown persons around our head office locations.”

READ: FG apologizes, says Self-Certification directive is not for everyone

The locations stated were 4 HealthPlus branches in Lekki, Lagos.

HealthPlus stated further, “We are aware that there are unauthorized and illegal plans by certain persons to take over our company premises to steal sensitive company property and assets, and ultimately take over operations of the company”

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The 4 persons mentioned by HealthPlus are; Zachary Fond and Ivan Genadiev (both Alta Semper Directors), Ernest Eguasa, CFO of company and an unidentified middle-aged white man.

Explore the Nairametrics Research Website for Economic and Financial Data 

Niarametrics reported last week that HealthPlus Limited appointed Chidi Okoro as Chief Transformation Officer.

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However, the announcement set off a chain of allegations and counter-accusations, including online media mudslinging with both sides trying to court public sympathy for who is in control of the company.

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Economy & Politics

P&ID dispute: UK Court orders $200 million guarantee to FG

Nigeria’s Foreign Exchange Reserves was boosted after a London Court ordered the release of $200Million placed as security in the case against P&ID.

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A London Commercial Court has ordered the release of a $200 million guarantee as security to be paid to the Nigerian government in the P&ID $10 billion Arbitral Claim.

This was disclosed in a social media statement by the Central Bank of Nigeria on Tuesday.

Nairametrics reported earlier this month that The Federal Government secured a landmark victory in its bid to overturn a $10 billion arbitration judgment award against it in a case against Process and Industrial Developments (P&ID).

READ: Nigeria seeks bank documents of former President, others over $9.6 billion P&ID case

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The Court said that Nigeria has established a strong prima case that the contract was procured by bribes paid to insiders as part of a larger scheme to defraud Nigeria. He said that there is also a strong prima face case that the P&ID’s main witness in the arbitration, Mr Quinn, gave perjured evidence to the tribunal, and that contrary to that evidence, P&ID was not in the position to perform the contract.

In today’s statement, the CBN said, “Nigeria’s Foreign Exchange Reserves was this morning boosted by over $200Million when the London Commercial Court ordered the release of the $200Million guarantee put in place as security in respect of the execution of the much discredited P&ID $10 Billion Arbitral Claim.”

READ; Why the NNPC is being dragged to US courts by Exxon Mobil, Shell

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“The court also awarded a £70,000 cost in favour of Nigeria in addition to an earlier award of £1.5m.”

On January 31, 2017, an arbitration tribunal had ruled that Nigeria should pay P&ID, the sum of $6.6 billion as damages and breach of contract after a 2010 deal for a gas project in the Niger Delta part of Nigeria collapsed. The pre and post judgement accrued interest of 7% has seen the amount standing against Nigeria, rise to almost $10 billion, an amount that will be a serious dent on the country’s external reserve.

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Business

FG to revitalize rice farms in rice producing regions

The Minister stated that rice production is expected to increase as the government continues to revitalize rice farmers.

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The Federal Government has stated that Rice Farms in Anambra State and other regions will be revitalized to boost rice production, create jobs and also improve the living standard of the people in the State and the region.

This was disclosed by the Minister of State, Agriculture and Rural Development, Hon. Mustapha Baba Shehuri, during the assessment of Federal Government Rice Farms/Mills in Omor and Umerum in Anambra State.

Given the importance of rice as a staple in Nigeria, the Minister stated that the Federal Government is taking steps to achieve self-sufficiency in rice production, and this is evident in the policies of the government in achieving food and nutrition security, import substitution and promotion of inclusive economic growth across all sectors of the economy.

READ: CBN says 22 banks to restructure over 35,000 loans due to COVID-19

Government Policy Interventions in Agriculture and Rural Development has helped to develop the rice sector, and these interventions include the provision of farm inputs such as agrochemicals, organic fertilizers, knapsack sprayers, planting & harvesting equipment such as reapers, mini combine harvesters, threshers at a subsidized rate in order to increase productivity.

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The Minister added that these policies have not only increased the quantity of rice produced annually but interventions through the provision of modern rice milling machines to small/medium scale processors, has also helped to improve the quality of Nigeria milled rice to international standard.

READ: New PIB amends royalties by oil firms as Sylva clarifies position on scrapping of NNPC

However, Nigeria’s rice consumption still holds higher than production, but government interventions through myriads of policies have increased rice production from 4.8 million metric tons of milled rice in 2015 to over 6 million metric tons by 2019 with a huge reduction in the nation’s deficit.  Hon. Mustapha Baba Shehuri explained that production is expected to increase as the government continues to revitalize rice farmers.

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Shehuri said that ”the Ministry has established 23 Paddy Aggregation Centers nationwide to aggregate and store paddy. The centres were given to members of the Paddy Dealers Association of Nigeria (PRIDAN) under the public-private partnership arrangement”.

READ: How to register for FG’s N75 billion MSME survival funds

In like manners, there will be the dissemination of modern rice production and processing technologies, through capacity building of farmers and processors directly and also in conjunction with the international donor agencies such as Japan International Cooperation Agency (JICA), Food and Agriculture Organization (FAO), German International Cooperation (GIZ), International Fund for Agricultural Development (IFAD), Competitive Africa Rice Initiative (CARI), AfricaRice.

He reiterated that the Ministry is currently responding to the challenges of food availability posed by the COVID-19 pandemic by supporting smallholder farmers nationwide with various inputs including certified seeds of improved varieties of food crops such as rice, maize, sorghum, wheat, orange-flesh sweet potato, groundnut cowpea, soybean, yam, as well as cash crops like cashew, cocoa, sesame, oil palm, gum Arabic. Others include herbicides, pesticides and agricultural machinery such as rice reapers, transplanters, power tillers motorized sprayers and processing equipment.

These interventions are expected to alleviate the effect of the pandemic on farmers and ensure that they keep producing food for the country.

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