Dangote Sugar Plc, the largest producer of the sweetener in Africa’s largest economy is making significant investments into the future as it is spending aggressively on the acquisition of property, plant and equipment.
The capital expenditure to sales ratio or Capex to sales ratio 0f the consumer goods giant increased to 8.92 percent in June 2021, and that is higher than 5.64 percent recorded in the previous year, based on MoneyCentral calculations.
It spent N19.11 billion on the acquisition of property, plant and equipment (PPE), for the period, which represents a 228.15 percent surge from 2020’s N5.82 billion.
The improvement in capital spending stems from improved consumer confidence, gradual economic recovery on the back of pick up in business activities, and Dangote Sugar’s optimism about the country’s economic outlook.
Of course, the company’s investment outlays paid off as revenue surged by 107.58 percent to N214.29 billion in June 2021 from N103.23 billion as at June 2020.
Its net income followed the same growth trajectory as it spiked by 157.11 percent to N29.77 billion in the period under review from N11.58 billion the previous year.
It is noteworthy that business optimism has improved, and the rebound in crude oil price will add further strength to consumer spending.
Headline PMI registered at 52.3 in September, little- change from 52.2 in August, and indicative of a 15th consecutive monthly expansion, according to Stanbic IBTC Purchasing Manager Index.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
Central to the improvement was a solid and accelerated rise in new orders, which panellists mostly linked to the securing of new clients.
However, Dangote Sugar and peer rivals are hobbled by rising input costs brought on by severe dollar scarcity and currency volatility while energy costs are piling.
While some are able to pass on cost to consumers in the form of higher price, it is unrealistic they will continue to squeeze already beleaguered consumers whose pockets had been squeezed by the coronavirus pandemic.
Dangote Sugar’s total production cost spiked by 97.35 percent to N170.23 billion as at June 2021, from N86.24 billion the previous year.
Analysts at Chapel Hill Denham in a recent note to clients attribute spiraling costs to the increase in import duty on raw sugar to 10 percent by the regulator.