Dangote Sugar Refinery Plc financial performance has presented a great opportunity for bountiful harvests for investors as they have continued to enjoy a lot of benefits of their investments in the company.
The investors have benefited from both share price rally and dividend payout. In the year 2017, the company’s share price gained 227.33 per cent to emerge 2017 best performing stock and the company also declared a total dividend of N1.75 per share as against 60 kobo dividend paid in 2016.
The company which recently released its audited result for the year ended December 31, 2017 showed total revenue stood at N204.42 billion, a 20.4 per cent increase over N169.72 billion posted in 2016 was driven by price of refined sugar.
The company said its major cost of sales driver remains raw sugar. Cost of raw sugar during the year rose to its peak in the third quarter and started declining thereafter by more than 20 per cent by the end of the year, a situation which resulted in overall increase in cost of material for the year. Average selling price per 50kg bag for the year was N15,636 and N10,899 for 2016.
However, the effect of the increase was partly cushioned by the stability and availability of foreign exchange. The naira was stable against the United States dollar at N305.75 at the beginning of the year and remained at the closing average figure of about N306 per dollar.
Gross profit increased by 121.8 per cent to N50.99 billion from N22.98 billion. The increase in direct overheads were mainly driven by production cost, which was driven by increased energy cost. The price of gas increased marginally from $7.38/mscf to $7.45/mscf, combined with the instability in gas supply during the first 3 quarters, pushed up the overall energy cost for 2017. This led to the use of LPFO at a higher price against budget. Our actual average price for the year under review was N143 per litre against budgeted price of N100 per litre.
Investment income, which reflects interest earned on bank deposits at an average rate of 13.5 per cent per annual on short term (30 days) bank deposits, giving rise to interest income of N3.4 billion from N601 million in 2016. Investments made in respect of the various Backward Integration Projects (BIP) were funded from DSR’s internal resources.
The Group liquidity position improved from N35 billion to N41 billion as at December 31, 2017. In line with our liquidity management policy the excess funds were placed on short term fixed deposit to earn investment income of N3.4 billion as against N0.6 million in 2016.
In addition to the above sum, N13 billion was deposited with the Central Bank of Nigeria for foreign exchange forward contract payable to foreign trade creditors at maturity. This sum is treated as other financial assets under the broad class of other assets in the Statement of Financial Position.
Group profit before tax for the period increased by 173 per cent to N53.599 billion from N19.614 billion in 2016, while Group profit after taxation for the year increased 176.3 per cent to N39.78 billion from N14.395 billion.
The board, having paid an interim dividend of 50 kobo per ordinary share, has recommended a final dividend payout of N1.25 per ordinary share to be paid to shareholders for the year ended December 31, 2017.
Acting group managing director of Dangote Sugar, Abdullahi Sule, said, “we are very pleased with the 2017 business year, with an increased revenue growth of 20.4 per cent over 167.7 billion recorded during the same period in 2016, and N28 billion gross profit increase of 121.8 per cent, the best recorded in the history of the company.
“Our focus for 2018 remains the actualisation of our BIPs plan with focus on the achievement of 1.080 million metric tonnes sugar from our BIP sites in the next six years.
“While concerted efforts are being made to leverage our strengths and maximize every opportunity to increase our market share and create sustainable value for all stakeholders.”
On the Backward Integration goal, the company said it is to become a global force in sugar production, by producing 1.5M MT/PA of refined sugar from locally grown sugar cane for the domestic and export markets.
“To achieve this, Dangote Sugar has acquired other sites at Tunga, Nasarawa State of 60,000ha, Lau/Tau, Taraba State of 25,000ha to augment Savannah’s 32,000 hectares in Adamawa state. The brown field sites like Savannah Sugar will be integrated sugar production facilities with new plantation and modern facilities that are located closer to the consumers,” it stated.
For the year 2018, the company said, “we started the new year with the same challenges from the previous year ranging from the Apapa traffic gridlock, inability of our trucks to access the ports into our facility, menace of unlicensed sugar imported into the country, terrible road conditions nationwide to our key markets nationwide and its attendant effect on our delivery timeline, high exchange rate though stable, amongst others.
“We are however undeterred, with concerted efforts being made to ensure evacuation of products through alternate means of transportation, in addition with the increase of our fleet to boost trucks availability.”
The company said “achievement of our Sugar for Nigeria Backward Integration Project goal remains our priority. Efforts are ongoing to ensure that the project targets are delivered on schedule.
“The directors of the company continue to apply the going concern principle in the preparation of the financial statements. Their assessment of the Group’s and the company’s ability to continue as a going concern, strengthen the believe that there are no threats to that the Group will remain a going concern.”
Dangote Sugar is Nigeria’s largest producer of household and commercial sugar with 1.44M MT refining capacity at the same location and was listed on the Nigerian Stock Exchange (NSE) in March 2007.