Rising Power, Raw Materials Costs Wipe Gains Of Dangote Sugar’s 67.9% Revenue Growth

Directors Offer 60 Kobo Dividend

For the board of Dangote Sugar Refineries Plc, the 2016 financial year came with mixed blessings, as revenue from sales soared by N68.667bn or 67.94% from N101.067bn in 2015 to N169.724bn in a year when inflation was in double digits, while economic recession and stagflation became everyday lexicons.
The directors said the rise in revenue “was chiefly driven by increase in price as just about same volume- 778,518 metric tons and 778,000 metric tons- were achieved in 2016 and 2015 respectively.”
These economic realities however showed up in the faster rise in cost of sales by about N66.154bn or 82.09% from N80.582bn to N146.736bn, driven by cost of raw sugar which increased by 97% “through the combined effect of price and exchange rate increase.”
This left gross profit at N22.988bn, slightly better than prior year’s N20.474bn.
Foreign exchange, the directors noted, jumped to an average figure of about N400/$ and N305.5/$- official; while the parallel market sold for N495/$, negatively impacting on raw material cost.
Added to this, they explained further, was the unfavourable usage ratio for gas to LPFO, resulting from interruption in supply, which resulted in increased usage of LPFO at N97/litre, a higher cost than the N68/litre budgeted for the year, following which there was a jump in energy cost.
These escalating cost elements could however not be totally absorbed by a corresponding increase in product price.
Other income dropped by half to N748.015m from N1.332bn, just as selling and distribution expenses grew to N1.272bn from N890.678m; while administrative expenses increased slightly to N5.656bn from N5.318bn.
Operating profit therefore stood at N16.807bn from N15.958bn.
Investment income soared to N601.473m from just N11.875m, helped by the improvement in liquidity position from N9bn to N35bn; following which “as part of our liquidity management policy, the excess funds were placed on short term fixed deposits to earn such high investment income. Fair value adjustments increased to N2.504bn from N1.21bn, just as finance cost dropped to N299.02m from N664.886m, helped by the successful subscription to a N2bn Sugar Intervention Facility (SIF) by Savannah Sugar, its subsidiary from the Central Bank of Nigeria (CBN), resulting to the net saving of N374m in finance cost during the period.
Profit before tax stood at N19.614bn from N15.155bn, while a N5.218bn income tax expense, up from N5.013bn, leaves profit for the year at N14.395bn from N11.142bn, representing Earnings Per Share of 120 kobo, as against the previous 93 kobo, out of which the directors have recommended the distribution of N7.2bn or 60 kobo dividend per share.

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