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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.

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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.

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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.

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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

Apple, Microsoft gain over 1%, propels Nasdaq up

Apple and Microsoft shares rose 1% and 1.3%, respectively, to lead tech higher.

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Apple, Microsoft gain over 1%, propels Nasdaq up

U.S tech Stocks gained higher as leading tech brands stocks that include Apple and Microsoft witnessed buying pressures significantly.

Apple and Microsoft shares rose 1% and 1.3%, respectively, to lead tech higher. Alphabet shares gained nearly 1% and Amazon advanced 0.7%. Netflix was up 0.5% and Facebook advanced 0.2%.

Explore the Nairametrics Research Website for Economic and Financial Data

The Dow Jones gained 0.2%, to settle at 26,815.44. At its session low, the Dow was down 226 points. The S&P 500 rallied up by 0.3% to 3,246.59 and the Nasdaq composite advanced 0.4% to 10,672.27.

The bullish run, however, was kept in check, as first-time claims for state unemployment benefits totaled 870,000 for the week ended Sept. 19

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READ: Should I quit my job and start a business? Yes, if you pass these tests

While investors wait for the passage of the U.S stimulus package lingering at the U.S capitol, Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics spoke on price movements in notable tech stocks, like Apple

READ: Nigerians in diaspora reveal their favourite Nigerian Stocks 

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Before the street started to pick up on the more favorable stimulus overtones US equities had been climbing steadily since the open with Tech and pockets within Cyclicals/Value leading the way midday. Apple is again setting the tone for Tech. Defensives outperformed out of the gate, although the last leg up seems more Cyclical and Value-driven. Many folks think this market cannot run without Financials, so with Financials acting better and Tech finding support, one could easily make a case for a low-volume melt-up in the near term,” he said.

READ: Guinness gains on NSE despite N17 billion pre-tax loss

However, it’s critical to note that stock traders, global investors are having a tough time in September, with the major equity benchmarks falling momentarily as tech shares lose steam.

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Cryptocurrency

Nigeria is Africa’s leader in Bitcoin transfers, transacts $8 million weekly

Data shows that the use of Bitcoin for peer to peer lending in Nigeria is on an astronomical run.

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Nigeria is Africa's leader in Bitcoin transfers, transacts $8 million weekly, Nigeria is Africa's leader in Bitcoin transfers, transacts $8 million weekly

Nigerians increasing their use of BTC is no longer news, but what seems astonishing is the volume that they transact with BTCs weekly, compared to other African countries.

Data shows that the use of Bitcoin for peer to peer lending in Nigeria is on an astronomical run.

Recent statistics obtained from usefultulips, a BTC analytic data provider, stated that Nigeria leads Africa peer to peer lending in 2020, posting weekly P2P volumes of between $8million, followed by South Africa and Kenya posting about $2 million weekly.

READ: Has the President erred in stopping CBN from funding food imports?

Quick Facts: In BTC’s case, peer to peer is the exchange of BTC between parties (such as individuals) without the involvement of a central authority. This means that peer to peer use of BTC takes a decentralized approach in the exchange of Bitcoins between individuals and groups.

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It shows that BTC’s long-running narrative as the “digital gold” for hedging against global economic turmoil is gaining the trust of Nigerians for payments and transfers.

READ: Unknown Bitcoin whale moves $1.3 billion in minutes

The financial market turmoil triggered by COVID-19 has definitely changed the way Nigerians view the whole financial system, as data also obtained from Google trend shows Nigeria leading the pack around the world in Bitcoin searches.

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This is a testament to the fact that Nigerians truly love their Bitcoins.

It’s important to note that Nigeria’s Securities and Exchange Commission is aware of the high precedence of crypto use in Africa’s biggest economy, and has up come with rules recording to the fast-changing financial sector

READ: SEC discovers 12 ponzi scheme operators, warns investing public

Chimezie Chuta, Founder, Blockchain Nigeria User Group, spoke with excitement on the long-overdue legal framework by the Nigerian Securities and Exchange Commission regulating digital assets and blockchain investments.

“SEC Nigeria has consistently shown that it has a clear understanding of her role in creating a conducive environment for the growth and development of Virtual Financial Assets, and Cryptocurrencies in general.

“This recent publication will act as a catalyst for mass adoption. It will also create much needed institutional investor confidence for the Nigeria Capital Market.”

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Market Views

Nike stocks post gains, women’s apparel division grow by 200%

Nike has used the COVID-19 pandemic as leverage to expand its digital business as it reported a surge in its in online sales.

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Nike stocks post gains, women's apparel division grow by 200%

Nike, the most valuable fashion brand in the sports business, saw its stock price rising on Tuesday, as the company reported an 82% surge in online sales and offered an impressive outlook that calls for demand to grow through the holidays.

Nike has used the COVID-19 pandemic as leverage to expand its digital business, and its women’s apparel division grew by nearly 200%. Parents stocked up on back-to-school items, and its business picked up in key markets like China.

READ: Flour Mills and its diverse challenges

Highlights of the results 

First-quarter reported revenues were $10.6 billion, down 1 percent on a reported basis, and flat to the prior year on a currency-neutral basis.

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Nike’s direct sales were $3.7 billion, up 12 percent on a reported basis, and up 13 percent on a currency-neutral basis, with growth across all geographies.

Brand digital sales increased 82 percent, or 83 percent on a currency-neutral basis, with double-digit increases across North America, Greater China, and APLA and triple-digit growth in EMEA.

READ: Unmarked hotels and short-stay apartments report high occupancy rates during COVID-19

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Diluted earnings per share for the quarter was $0.95, up 10 percent. Inventory rose 15 percent versus the prior year, but decreased 9 percent versus the prior quarter.

“Our results this quarter continue to demonstrate NIKE’s full competitive advantage, as we strengthen our position in the midst of disruption,” said John Donahoe, President, and CEO, Nike, Inc.

READ: UPDATED: Nigeria received $1.29 billion capital inflows in Q2 2020, down by 78.6%

“In this dynamic environment, no one can match our pace of launching innovative products and our Brand’s deep connection to consumers. These strengths, coupled with our digital acceleration, are unlocking NIKE’s long-term market potential.”

COVID-19 pandemic is also helping Nike’s digital potential. The company disclosed that its digital sales now make up at least 30% of its total quarterly sales, a threshold that Nike had previously aimed to hit in three years’ time.

“Nike is recovering faster based on accelerating brand momentum and digital growth,” CFO Matt Friend stated on Tuesday.

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Full details of the results can be found here

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