Dangote Sugar’s H1 2024 loss after tax plunges to record N144bn as economic instability weighs down earnings

Cynthia Ezekwe

The adverse market conditions and mounting economic pressures took a heavy toll on Dangote Sugar Refinery, a leading integrated sugar business majority-owned by Africa’s wealthiest man,Aliko Dangote, as the company suffered a N144 billion loss in the first half of 2024, a more than five-fold increase from the N28 billion loss it recorded in the corresponding period of 2023. This plunged the Dangote Sugar Refinery into its worst-ever first half-year loss.

The huge loss that Dangote Sugar Refinery endured in the first half of 2024, according to the company’s earnings report, was largely driven by an unprecedented foreign exchange revaluation loss of N193.7 billion, a 134.3 percent increase from the N83.09 billion reported during the same interval in 2023.

Despite the massive loss, the company’s revenue exhibited remarkable strength with a 45.8 percent rise to N295.6 billion, demonstrating the fundamental durability of the business amidst the intensifying economic pressures.

Soaring input costs, driven by imported inflation and a depreciating naira, outpaced Dangote Sugar’s sales growth of 45.78 percent, despite the company’s attempts to pass on these increases by raising product prices.

Market data shows that global sugar prices, while declining, have failed to translate to local markets, resulting in an unrelenting rise in domestic sugar prices. This unyielding cost escalation has caused production costs for Nigerian sugar producers to spiral out of control, as companies like Dangote Sugar grapple with mounting economic pressure and market volatility.

Commenting on the financial results, Ravindra Singhvi, chief executive officer of Dangote Sugar Refinery, attributed the deterioration in earnings to a range of factors, including spiraling inflation, escalating borrowing costs, and the declining strength of the Nigerian naira, all of which weighed heavily on the company’s operations and exerted significant pressure on the bottom line.

“Despite these obstacles, we achieved a robust revenue growth of 45.8 per cent reaching N295.6 billion, primarily due to price adjustments implemented in response to heightened cost pressures. However, we incurred a loss after tax of N144 billion, primarily attributable to non-cash foreign exchange losses amounting to N193.7 billion, exacerbated by the significant year-on-year devaluation of the naira. Excluding these foreign exchange losses, our recurring profit after tax stood at N45.2 billion,’’ the CEO noted.

Singhvi reaffirmed the company’s commitment to advancing its Backward Integration Project for domestic sugar production, underscoring the strategic importance of this initiative in mitigating the adverse effects of currency devaluation.

“We have made substantial investments and will continue to expand our local sugar production capacity. DSR is significantly increasing production capacity at its Numan plantation to 9,800TCD, and we are in the process of raising funds for the Nasarawa Backward Integration Project. Despite facing short-term challenges in the first half of the year, we reached a significant milestone in repositioning the business for growth,’’ he said.

Singhvi also disclosed that the company has successfully launched a N200 billion bond programme, a pivotal step in the company’s broader strategy to boost  its backward integration plan.

The CEO also noted that in the medium term, the factory will generate 32 megawatts of electricity using new turbines and two high-pressure boilers. This, he explained, will also enable the production of ethanol and animal feed from by-products like molasses and bagasse.  He stated further that these initiatives are designed to diversify our revenue streams and reduce the risk associated with exchange rate fluctuations.