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Cost Gains boost Dangote Sugar’s earnings and margins

Dangote Sugar Refinery Plc posted Q1:2019 revenues of NGN38.15bn, which is 7.72% lower than the NGN41.14bn generated in Q1:2018.



Dangote Sugar Refinery
Smuggling and Price Cuts Drag Revenue: Dangote Sugar Refinery Plc posted Q1:2019 revenues of NGN38.15bn, which is 7.72% lower than the NGN41.14bn generated in Q1:2018. The decline was fueled by the drop in the price of sugar; average price per 50kg bag of sugar fell from NGN13,054 in Q1:2018 to NGN12,775 in Q12019.
The prevalence of smuggled products in primary markets in the Northern parts of the country also precipitated in NGN1.93bn loss in revenue. The group production and sales volume, however, increased by 34.96% and 3.76% respectively, helping to moderate the impact of the price reduction. The uptick in sales volume in Q1:2019 also reversed a downward trend observed since Q1:2018, reflecting early indications that management efforts at improving the distribution of products are yielding results.
We maintain our previous projection of a 7.00% increase in sales volume. However, considering the pressure on price, we revised our revenue expectation down to NGN154.99bn, representing a 3.08% rise from the revenue in 2018 FY.
Cost Gains Boost Margins: The downtrend witnessed in global raw sugar prices from an average of $14.85 per pound in Q1:2018 to $12.88 per pound in Q1:2019 precipitated an 8.00% drop in the cost to sales ratio to 67.00% in Q1:2019. Hence, the gross margins increased to 33.00% in Q1:2019(vs. 25.00% in Q1:2018).
The management fees, along with selling and marketing expenses, also dropped by NGN241.42mn and NGN178.33mn respectively  (vs.NGN420.20mn and NGN213.68mn in Q1:2018), thereby increasing operating margins from 21.74% in Q1:2018 to 28.46% in Q1:2019. In line with the trend witnessed in the gross and operating margins, the net margins increased from 12.85% in Q1:2018 to 18.36% in Q1:2019 despite a higher tax expense of NGN3.70bn (vs. NGN3.11bn in Q1:2018).
The cost gains witnessed in Q1:2019 are expected to remain for the major part of the year. However, raw sugar prices might tick upwards slightly towards the end of the year as the effects of lower sugarcane production and allocation to sugar production begin to pressure prices. Given our revised revenue and cost of sales estimates of NGN113.92bn for 2019 FY, we expect net profit to settle at NGN22.19bn, representing a net margin of 14.32%.
Smuggling Prompts Rise in Receivables: The prevalence of smuggled products in key markets of the company also resulted in the company receivables increasing by 22.33% over the period to NGN9.22bn in Q1:2019 from NGN7.54bn at the end of 2018. The implication of the increased receivables is reflected in the earnings quality of the company as the operating accruals rose to NGN6.19bn from NGN1.78bn in Q1:2018, indicating poorer cash generation from operations during Q1:2019.
Valuation and Rating: Following due considerations of market and industry risks facing the company, we estimate a target price of NGN13.41 based on a target PE of 7.25x and expected EPS of NGN1.85. The target price has a downside of 2.85% from the share price on May 13, 2019; hence we place a HOLD rating on the stock.

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Covid-19: WHO approves China’s Sinopharm vaccine

WHO has announced the approval of China’s Sinopharm vaccine for Covid-19 vaccination.



Covid-19: First world nations oppose waiving intellectual rights for vaccine development

The World Health Organization (WHO) has announced the approval of China’s Sinopharm vaccine for Covid-19 vaccination.  The vaccine is reported to have 79% efficacy against covid.

This was disclosed today in a report by Reuters. The vaccine would also be the second Chinese-made vaccine after Sinovac vaccine and would be the first developed outside Europe and North America to receive WHO accreditation.

“This expands the list of COVID-19 vaccines that COVAX can buy, and gives countries confidence to expedite their own regulatory approval, and to import and administer a vaccine,” WHO Director-General, Tedros Adhanom Ghebreyesus said.

The WHO added that the easy storage requirements make it highly suitable for low-resource settings.

“Its easy storage requirements make it highly suitable for low-resource settings,” a WHO statement said while also disclosing that the vaccine has been approved for people above the age of 18 to receive two shots.

“On the basis of all available evidence, WHO recommends the vaccine for adults 18 years and older, in a two-dose schedule with a spacing of three to four weeks,” the statement added.

The vaccine was created by Beijing Biological Products Institute, a subsidiary of Sinopharm subsidiary China National Biotec Group, with an efficacy of 79% for all age groups.

The WHO however, admitted that few older adults (over 60 years) were enrolled in clinical trials, so efficacy could not be estimated in this age group.


In case you missed it

The quest for vaccine efficiency got a major boost earlier this week as Nairametrics reported that the United States government announced that it supports the waiver of Intellectual Property Protections on Covid-19 vaccine development, in a bid to boost the fight against the pandemic, and says it will participate in the Okonjo-Iweala-led WTO negotiation to make it happen.

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“Mama Taraba”, Former minister and senator, Aisha Al-Hassan is dead

Ex-Women Affairs minister, Aisha Jummai Al-Hassan, popularly known as Mama Taraba is dead



A former Minister for Women Affairs and ex-Governorship Candidate in Taraba State, Aisha Jummai Al-Hassan, popularly known as Mama Taraba is dead.

According to media reports she died in a hospital on Friday in Cairo, Egypt at the age of 61.

Al-Hassan, who was a former senator of the Federal Republic of Nigeria from Taraba North Senatorial District, was the All Progressive Congress (APC) Governorship Candidate for Taraba in the 2015 general elections.

READ: Abba Kyari’s last letter to President Buhari

She later contested for the same seat on the platform of the United Democratic Party in the 2019 general elections after resigning from APC and as a minister in the administration of President Muhammadu Buhari on July 27, 2018.

The former senator was born on the 16th of September, 1959 in Jalingo, Taraba State, to Alhaji Abubakar Ibrahim, Sarkin Ayukan Muri.

READ: Chad’s President Deby dies of injuries suffered on the frontlines, as son takes over

Aisha Jummai Al-Hassan attended Muhammed Nya Primary School, Jalingo and LEA Primary School, Tudun Wada, Kaduna before proceeding to Saint Faith College (now GGSS) Kawo Kaduna where she studied between January 1973 and June 1977.


Details later…

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