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Market Views

Import substitution, devaluation spur revenue growth for Dangote Sugar

The company said it sold higher sugar volumes in the quarter compared to the previous quarter.

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Aliko Dangote rallies private sector operators against COVID-19, 10 fantastic things Aliko Dangote has done in the last 10 years

Nigeria’s largest sugar manufacturer, Dangote Sugar reported a year on year revenue growth of 31.7% in the second quarter of 2020. The revenue growth was spurred by government policies on border closure and exchange rate devaluation, even though it conversely increased cost and reduced margins.

Key Highlights – 2020 Q2

  • The sugar giant reported revenues for the 3 months ending June 2020 closed at N55.5 billion compared to N42.2 billion in the same quarter in 2019.
  • Second-quarter revenue growth also topped Q1 revenue of N47.6 billion despite the severe impact of the COVID-19 pandemic.
  • Pre-tax profits also grew to N7.5 billion, 19%yoy in the same period
  • Profit margin – 9.37% (2020 Q1: 13.4%, 2019 Q2: 9.4%)
  • Sales (tonnes) – 189,724 vs 158,818  +19.5

READ ALSO: Flourmills posts impressive Q3, sustains recovery in 2020 financial year

Reason for the revenue boost

A review of the results reveals the company continued to receive a sales boost from increased demand from customers within Nigeria. This was also largely due to the positive impact of the border closure and import substitution policy of the government. In an earnings press release seen by Nairametrics, the company explains that it sold higher sugar volumes in the quarter compared to the previous quarter.

“We had a strong performance in the 2nd quarter of 2020 with the delivery of 382,917 tonnes, which translated to a 13.6% growth over the same period in 2019.” 

Despite the COVID-19 lockdown, logistic bottleneck, and traffic gridlock, Dangote Sugar produced 182,692 tonnes of sugar in the second quarter of the year compared to 160,917 same periods in 2019. Though it was still lower than the 192,584 produced in the first quarter of 2020.

READ MORE: Dangote Sugar Refinery in Tunga to produce 450,000 MT

Effect of government policies

The company has benefitted immensely from government policy on border closure and import substitution. Both policies mean local manufacturers like Dangote Sugar can meet the demand of local purchasers who rely on sugar as input for other finished goods. The devaluation also appears to have helped boost revenues due to price adjustments.

Revenue growth of 28.5% forged ahead of volume growth due to pricing benefits on the back of rise in FX rate. The 1st half of the year performance reflects our drive for topline growth, despite the continued grid gridlock in Apapa; in addition to rising inflation and the deplorable state of roads to our key markets nationwide.

Its two major customers are Nigerian Bottling Company and Seven-Up Bottling company limited, combining to purchase about 10% of its sales. The two companies buy industrial non-fortified sugar from Dangote Sugar Plc. Its non-fortified sugar makes up 35% of sales. Half of its sales are made in Lagos, while another 38% is in the North.

Explore Advanced Financial Calculators on Nairametrics

Whilst, government policies did help, Dangote Sugar also suffered from cost spikes due to the devaluation and forex shortages.

“The Company’s performance during the period under review was impacted by COVID-19 pandemic which caused disruption to the global economy, availability of foreign exchange, oil prices, consumer demands, and social interactions. This led to the enormous FX shortage in Nigeria, and the huge backlog of FX demands, due to the constricted ability by the CBN to meet FX demands.”

READ MORE: Airtel Africa’s profit up 12.9%, customer base reaches 111.5 million

Dangote Sugar currently implements a backward integration programme and targeting to produce target to produce 550,000MT of refined sugar by 2020.

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Market Views

US Stock markets unruffled about disappointing job report

Wall Street was unshaken as it posted record gains at the end of the week despite a disappointing April job report.

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Apple, Microsoft gain over 1%, propels Nasdaq up

The April unemployment survey in the United States was a puzzler by most accounts. The 266,000 additional payrolls were the largest shortfall in economists’ estimates for nonfarm payrolls since the 1990s when many expected 1 million workers to be added to payrolls last month. However, Wall Street was unshaken as it posted record gains at the end of the week.

While analysts warn that the figure is poor, considering how many people have fallen out of the workforce in the past year, the unemployment rate in April remained remarkably stable at 6.1 percent and the market maintained its bullish pace. The Dow Jones Industrial Average (+0.66%) and the S&P 500 index (+0.74%) posted record closes on Friday, as the weak jobs report affirmed views that the Federal Reserve will keep financial conditions easy for longer.

Despite Friday’s gains, large-cap technology stocks are also lagging behind the overall market. For the year, Apple Inc (AAPL.O) is down almost 2%, Amazon.com Inc (AMZN.O) is up less than 2%, and Netflix Inc (NFLX.O) is down 6.5 percent. Overall, the technology market is up 6.8% year to date, less than half of the S&P 500’s 12.6 percent increase (.SPX).

READ: China, US confirm global recovery, capital market stocks are nearing all-time high

Furthermore, value stocks in cyclical sectors like financials, oil, and consumer sectors are soaring. The Russell 1000 Value index (.RLV) has gained 18 percent this year, including 0.7 percent on Friday, while the Russell 1000 Growth index (.RLG) has gained 6.3 percent this year, including 0.6 percent on Friday.

Although some technology stocks rose on Friday after a lacklustre U.S. unemployment report, some portfolio managers believe that recent blowout profits from many major technology firms are insufficient to justify continuing to make large bets on the industry.

The 266,000 new jobs added in April was a significant decrease from the 770,000 new jobs added in March. The rise in April was fueled by employment growth in the leisure and hospitality sector, which gained 330,000 jobs, with more than half of those in restaurants and bars. Overall, the industry employs 2.8 million fewer people than it did prior to the pandemic.

Wide losses in temporary support providers and couriers and messaging services, as well as smaller drops in manufacturing and retail, reversed those gains. Construction employment remained largely stable.

Because of the high liquidity created by the stimulus package and the FED’s decision to keep rates unchanged, the stock market appears to be immune for the time being. The biggest issue on most people’s mind is how long this positive mood will last in the economy.

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Market Views

Top 10 Stockbroking firms in Nigeria for April 2021

The top ten Stockbrokers traded shares worth N111.8 billion in April 2021, accounting for 69.9% of the total amount of shares traded.

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Governor Fayemi explores investment options with the capital market, Nigerian Stock Exchange, Top 10 stockbrokers trade N120.4 billion worth of stocks in November , Law Union & Rock Insurance Plc Announces Notice of Board Meeting and Closed Period, NSE Hosts First Virtual Automated Trading System (ATS) Broker Certification Training Programme, Steroids from GTBANK, ZENITH Lift Nigerian bourse, as investors gain N94.2 billion, Nigerian bourse close flat, triggered by low market liquidity, Industrial index down by 5.7%, as shares of BUA, Lafarge, Dangote, others decline on NSE

The Nigerian Stock market ended the month of March 2021 bullish as the All-Share Index grew by 2.02% from 39,045.13 points recorded as of March 31st, 2021 to close at 39,834.42 points at the end of April 2021.

Meanwhile, the top-performing stockbroking firms in the Nigerian Exchange Group (NGX) traded about 4.89 billion units of shares with a value of N111.8 billion, accounting for 69.9% of the total value of shares traded in the month.

This is according to the Broker performance Report, released by the Nigerian Stock Exchange for the month of April 2021.

According to the report, Morgan Capital Securities led the list of stockbroking firms by volume of shares while Investment One Stockbrokers traded the highest in monetary terms for the period under review.

READ: NSE-30 companies lose N1.13 trillion in market capitalisation year-to-date


Stockbrokers by value

The top ten Stockbrokers were responsible for 69.9% of the total amount of shares traded in April 2021, trading a total of N111.8 billion worth of shares.

  • Investment One Stockbrokers toppled Stanbic IBTC to top the list with trades valued at N60.91 billion in April 2021, representing 38.08% of the total value of shares traded during this period.
  • Rencap Securities stood at second on the list with trades in stocks valued at N15.59 billion, accounting for 9.75% of the total value of shares traded in the month of April.
  • Cardinalstone Securities followed with its total trades valued at N8.45 billion in the period under review. This represents 5.28% of the total value recorded in the Stock Exchange market.
  • EFG Hermes also traded in stocks worth N7.05 billion, to stand fourth on the list as it accounted for 4.41% of the recorded trades in monetary value.
  • Stanbic IBTC Stockbrokers traded a sum of N4.1 billion worth of stocks, which accounted for 2.57% of the total value for the period.
  • Others include Meristem Stockbrokers (N3.87 billion), Chapel Hill Denham (N3.66 billion), Stonex Financial (N3.36 billion), CSL Stockbrokers (N2.53 billion), and Cordros Securities (N2.27 billion).

READ: REVEALED: Three reasons the NSE expelled 38 stockbroking firms in six months


Stockbrokers by volume

The top ten stockbroking firms for the period under review traded in 4.89 billion units of shares, accounting for 45.01% of the total traded stocks.

  • Morgan Capital Securities tops the list of stockbroking firms in terms of volume of shares traded as it recorded trades in 859.82 million units of shares, representing 7.91% of the total volume traded in the bourse for the period.
  • Cardinal Securities followed, having traded in 835.49 million shares, accounting for 7.69% of the total volume of shares traded in April 2021.
  • Investment One Stockbrokers traded in 566.53 million units of shares in the month under review. This represents 5.21% of the total recorded.
  • Meristem Stockbrokers Limited stands fourth on the list with trades in 564.54 million units of shares in April 2021, accounting for 5.19% of the total volume recorded.
  • FBN Quest Securities traded in a total of 449.25 million units of shares accounting for 4.13% of the total volume recorded in the period under review.
  • Others on the list include EFG Hermes (422.23 million), Rencap Securities (406.6 million), Falcon Securities (312.13 million), Stanbic IBTC (248.43 million), and APT Securities (226.28 million).

What you should know

  • The NSE ASI grew by 2.02% in the month of April 2021, bringing the year-to-date performance to a decline of 1.08%.
  • The NSE Banking Index however dipped by 4.76% in the month of April to close at 352.07 points, while the year-to-date growth stood at -10.42%
  • NSE Industrial Goods index grew by 3.06% in the review period.

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