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.
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.
