Company Analysis

Dangote Sugar beets 2016 full year profit in six months


Dangote Sugar Refinery ended half year operations in June with profit already well ahead of the full year profit figure it posted in 2016. That was notwithstanding a break out growth of over 29% in after tax profit last year. Since last year, the sugar refining company has been adding sweeteners to its earnings story in 2017.

There is a favourable combination of growing revenue and moderating costs that is working to build bigger profit capacity for the company this year. The company closed last year’s trading with a surprising leap of 68% in sales revenue, accelerating from a moderate improvement in 2015 that ended a three-year declining trend in turnover. It is sustaining the strong revenue growth momentum for the second year and profit is speeding up from the increase of 29% in 2016.

Sales revenue closed at N118.68 billion at the end of the second quarter in June, which is a year-on-year growth of 68.4%. It is expected to grow even stronger in the second half, which is the company’s critical earning season. Dangote Sugar Refinery is likely to close the year with turnover in the region of N250 billion.

Profit capacity is significantly lifted by the impressive growth record in sales revenue against a moderated increase in cost of sales. Cost of sales claimed a reduced share of sales revenue at 77.3% at the end of June 2017 compared to 80.2% in the corresponding period in 2016. That enabled the company to lift gross profit by over 93% during the review period.

Other favourable cost behaviours during the period were recorded from selling/distribution expenses, which dropped by 16% to N411 million and also from administrative expenses, which showed a relative moderation. Some improvement in other income reinforced the result from operating activities at the end of June, 2017. The favourable cost and income behaviours resulted in a 109% advance in operating profit, which amounted to N23.61 billion at half year.

The good news that topped up the company’s earnings story is that investment income multiplied more than 13 times from N126 million in the first half of last year to N1.66 billion this year. That plus a shift in fair value adjustment from a negative figure of N7.53 million to N284 million over the same period, led to a rise of 124% in pre-tax profit to N25.25 billion.

Finance costs are quite moderate at N301 million at half year. Dangote Sugar Refinery has an operating advantage of minimal balance sheet debts of about N2 billion.

At over N17 billion at the end of half-year operations, the company’s after tax profit is already in excess of the N14.4 billion figure it posted at the end of last year. The full year profit is projected at N35 billion for Dangote Sugar Refinery in 2017. This means the company could come quite close to raising after tax profit one and half times at the end of 2017.

There is a significant gain in profit margin this year from 10.5% in June last year to 14.4% at the end of June 2017. After tax profit grew by 29.3% last year – the first reasonable profit improvement that has happened since 2013.

The company earned N1.45 per share at the end of half-year operations, already ahead of the N1.20 per share it earned at the end of 2016. The full year expectation is N1.92 per share for Dangote Sugar Refinery in 2017. The company paid a cash dividend of 60 kobo per share at the end of the 2016 operations.

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