Connect with us
Paramount
Advertisement
Ican
Advertisement
IZIKJON
Advertisement
Stanbic IBTC
Advertisement
Polaris bank
Advertisement
Binance
Advertisement
Esetech
Advertisement
Patricia
Advertisement
Fidelity ads
Advertisement
app

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.

Published

on

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

bitcoin train

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

Binance

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Advertisement




Advertisement

Nairametrics | Company Earnings