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Company Results

Dangote Sugar Refinery: Revenue soars amid rising cost of sales

In the analysis of revenue, DSR major turnover emanates from Lagos; one of its 4 segments.

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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

Dangote Sugar Refinery (DSR) Plc, a major subsidiary of the Dangote Group posted a half-year profit of N11.6billion in 2020. This is marginally above the N10.9billion profit it generated y/y 2019.

The company has notably posted profit consistently and this time improved its revenue by 28.8% to N103billion for H1 2020 from N80 billion in the corresponding period of 2019.

DSR shows little sign of weariness as it very recently, on July 11, 2020, finalised plans to merge with Savannah Sugar Company Limited. Revenue ascends steadily as well in Q2, as it generated N8 billion higher than the N47.6 billion generated in Q1.

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In the analysis of revenue, DSR major turnover emanates from Lagos; one of its 4 segments.

For revenue in 2020, Lagos provided 48.5% whilst the other three segments (North, West and East) combined to 51.5%. This was the trend last year as well, where Lagos made 48.1% of the N80billion generated as revenue.

Obviously Lagos serves as hub for DSR’s operations. After the establishment of DSR as a private liability company in March 2000, its first refinery plant was commissioned a year later in Apapa Lagos.

READ: Cadbury releases 2019 FY result, grows profit by 26%

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Cost

The aspect of cost has been very worrisome for DSR. Its cost to revenue for 2020 HY is worse off than in 2019. In 2020, cost of sales constitutes 80% of revenue generated with the number pegged at N82.4 billion as opposed to its corresponding HY 2019 where cost of sales amounted to N57.3billion, 73.8% of revenue.

The sad pattern of increasing costs is noticed yet again between Q1 and Q2 2020 when cost to sales ratio moved from 73.3% to 85.4% between both quarters.

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READ: Border closure boost sales and profits for Nigeria’s Agroproducers

Balance sheet and cashflow

DSR presents a very healthy statement of financial position showing total assets of N229billion and total liabilities of N104billion.

It has no major borrowings in its books besides the N2 billion obtained from Zenith Bank in 2016 for a 10-year period and at interest of 9%.

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Current ratio as at HY 2020 is 1.3:1, with earnings per share appreciating by 5.5% to stand at 97kobo.

READ: No trophy for International Breweries after bland Q2 results

Net cash obtained from operating activities notably showed an 87% increase from N5.9billion in HY2019 to N46billion in 2020.

The consumer goods sector seemingly faces very mild reactions from its consumer and their demand pattern in this COVID-19 era unlike other industries. Revenue on the contrary continues to soar. The outlook for the remaining quarters of the year looks positive and quite promising for Dangote Sugar if proper attention is paid to the rising costs.

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Ekene Onyeama is a Chartered Accountant currently plying one of the Tier one Banks in Nigeria. He started out his career at Ideascorp Limited, a private company in the hospitality industry where he served as the accountant before switching to banking. Ekene enjoys analyzing companies. He likes to write and is very excited by company valuations. He can be reached on Twitter @Ekenergy_

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Company Results

Dangote Cement incurs N97 billion taxes in 2020

The cement giant incurred its taxes on record.

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One of Nigeria’s largest indigenous companies and the largest by market capitalization incurred a company income tax of N97 billion for the financial year ended December 2020.

This s according to the information contained in its full-year audited financial statements for the period under review.

Dangote Cement Taxes. 2018 was a tax credit.
Source: Nairalytics Research

Why this matters?

Dangote Cement has enjoyed Pioneer Status over the years and has often been criticized for not paying enough taxes despite its mega-profits.

  • The N97 billion incurred in 2020 is the highest company income tax reported by Dangote Cement since it became listed on the Nigerian Stock Exchange.
  • It incurred N49 billion in taxes in 2019 and got a tax credit of N89.5 billion in 2018.
  • Despite incurring N97 billion in taxes during the year, Dangote Cement’s actual tax paid was just N20.9 billion in 2020 compared to N4.6 billion paid a year earlier.
  • Tax incurred in the profit and loss statement is an accounting provision and is not always the actual tax paid in cash.
  • Putting it into context, the dividend paid during the year is N272 billion and interest payments to its creditors totals N48.2 billion.

Improved Cement Revenues

Despite the Covid-19 Pandemic, the Cement Giant reported full-year revenue of N1 trillion, the highest it has ever recorded since it was privatized almost 20 years ago. The company also reported a profit before tax of N373.3 billion only and a profit after tax of N276 billion, its highest since 2018.

Nigeria like most countries in the world has faced a challenging 2020 due to the impact of Covid-19 on the economy, especially the private sector. However, mega-corporations like Dangote Cement appear to have even performed better during the year. The cement industry in general also appears to have performed well during the year as the combined revenue of the top 3, Dangote Cement, Lafarge, and BUA rose to N1.47 trillion from N1.28 trillion.

The impressive result nonetheless, Dangote Cement’s margins remained strong during the year posting a gross profit margin of 57% in line with its 3-year averages. However, the higher taxes incurred in 2020 dropped profit margins to 26.7%. When compared to 2018 when it still enjoyed Pioneer status, the company posted profit margins of about 43%.

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Company Results

Dangote Sugar yearly revenue surge by 33%, announces a dividend of N1.50

Dangote Sugar Refinery Plc. recently declared a 33.0% Year to year growth in earnings to N29.8 billion for the financial year of 2020

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Dangote Sugar Refinery to merge with Savannah Sugar, Dangote was $4.3 billion richer in 2019, Dangote Sugar announces closed period, ban insider shareholders from trading , Dangote Cement: Weak revenue performance, elevated OPEX weigh on earnings

Dangote Sugar Refinery Plc via the Nigerian Stock exchange recently declared a 33.0% Year to year growth in earnings to N29.8 billion for the financial year of 2020

The company also announced a dividend of N1.50 (vs N1.10 total dividend in 2019).

Dangote Sugar’s revenue expanded by 33.0% YoY amid strong volume growth in its 50 kg sugar offering (c.96.0% of total sales).

The company’s impressive outing amazed a significant number of stock pundits despite a surge in tax charges which partially offset some of the positive passthrough from border closures on earnings.

READ: Dangote Sugar Refinery: Revenue soars amid rising cost of sales

Gross margin expanded by 1.31ppts Year to Year to 25.08%, which points to the effects of recent cost-containment measures and the slump in global raw sugar prices in 2020 amid the COVID-19 pandemic.

The raw sugar price dropped to as low $0.09/lb in 2020 and traded c.$0.13/lb on average during 2020 (-4.38% YoY)

What you should know: Dangote Sugar Refinery Plc (the Company) was incorporated as a Public Limited Liability Company on 4 January 2005, commenced operation on 1 January 2006, and became quoted on the Nigerian Stock Exchange in March 2007.

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Its current shareholding is 68% by Dangote Industries Limited and 32% by the Nigerian public.

The principal activity of the Group is the refining of raw sugar into edible sugar and the selling of refined sugar. The Group’s products are sold through distributors across the country.

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READ: Buhari to commission phase 1 of brand new refinery this week

That being said, in spite of such impressive results from the N217 billion valued company experienced a surge in operational cost partly due to persistent FX scarcity.

Dangote Sugar reported a four-fold increase in finance cost, which can be largely attributed to the foreign exchange loss in its ordinary business operations, driven by persistent FX shortages and naira repricing at the exchange rate windows.

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