Dangote Sugar hits sweet spot with 33% y/y revenue growth to N214.3bn

Gross profit rose 40.4% y/y to N53.7bn despite a covid-19 disrupted economy

Charles Abuede

Dangote Sugar Refinery (DSR) Plc, a subsidiary of Dangote Industries Limited, hit the sweet spot in its 2020 numbers despite the coronavirus pandemic, reporting a substantial double digit revenue growth of 33 per cent year on year to N214.3 billion in FY 2020 from N161.1 billion in the previous year.

Also, the foremost sugar refining company in Nigeria recorded a 13.7 per cent year on year rise in production to 743,858 tonnes compared with 654,071 tonnes posted in 2019. The growth has been attributed to the sustained efforts of DSR to expand its customer base, amid several trade initiatives and investments.

According to the result containing the company’s operational and financial performance during the year, aided by fair value adjustment gains, profit before tax was reported at N45.6 billion, surging by 53 per cent year on year. Also, a 112.5 per cent year on year increase in tax expense led to profit after tax being at N29.8 billion, still a 33.2 per cent year on year growth from N22.4 billion in 2019, while it recorded a 40.4 per cent year on year increase in its gross profit in 2020 from N38.26 billion in 2019.

However, the solid operational performance was hit by finance costs, which increased monstrously by 271.1 per cent year-on-year, given the company’s significant forex exposure. The cost of sales jumped 30.7 per cent year on year, resulting in a gross margin expansion of 131 basis points to 25.1 per cent in full-year 2020. Also, the company’s other income grew by 49.6 per cent year on
year to N907 million in the period under review, majorly due to insurance claim income and sale of scrap. DSR’s earnings per share came in at N2.45 per share, higher than the N1.87 per share proposed in 2019. The company’s gross and operating margins expanded by 131 basis points and 216 basis points, respectively, while net margin improved by a mere one basis point due to increased finance and tax expenses.

Furthermore, the company managed its selling and  distribution costs efficiently, cutting them by -16.8 per cent year on year from N813.8 million to N676.9 million. However, the administrative expenses increased by 15.3 per cent year on year to N9 billion in 2020. Also, the company charged an impairment of investment in Niger Sugar of N99 million. Moreover, its impairment losses on
financial assets increased by 29.7 per cent year on year to N430.8 million in the current reporting year. Resultantly, the company’s operating profit vaulted 48.5 per cent year on year to N44.4 billion. The company attributed the performance to operations optimisation strategy despite the momentary disruption caused by civil unrest in the last three months of the year.

Meanwhile, one of the company’s major key highlights was the successful completion of the merger of DSR and Savannah Sugar Company Ltd with effect from September 1, 2020, to operate under one unified entity. Similarly, revenues from all segments reported a double-digit growth except for freight income, which reported a -57 per cent year on year loss to N1.24 million from N2.89
million in 2019. Molasses revenue was up by 52.1 per cent year on year growth, while sugar revenue increased by 34.6 per cent year on year.

An examination of its growth numbers in terms of geographies, shows that a significant year on year revenue growth was contributed by Lagos (+92.2%), followed by Northern Nigeria (+33.6%) and Eastern Nigeria (10.9%). Western Nigeria, however, reported a revenue decline of 46.9 per cent year on year.