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Dangote Sugar Refinery Profits Surge 31% Despite FX Uncertainty

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Dangote Sugar Refinery Plc reported a 31.1 percent surge in profit after tax in its unaudited second-quarter result.

This performance brings cumulative earnings for the first six months of 2020 to N11.6 billion compared to N11 billion in the corresponding period of 2019.

Revenues for the sweetener maker rose by 31.7 percent year on year (YoY) to N55.6 billion in the review quarter, following strong increases in 50kg and retail sugar sales.

“We believe the business benefited from its first quarter price increase and sustained border closures in Q2’20,” analysts at Cardinal Stone Partners said.

Cost of goods sold surged by 40.9 percent YoY to N47.5 billion, likely reflecting the impact of naira devaluation and supply chain disruptions.

Dangote Sugar gross margin also contracted by 5.6pps YoY to 14.6 percent in the quarter.

However, margin contraction narrowed to 1.4 percentage points YoY at the PBT level due to the combined impact of a 30.9 percent decline in net operating expense and a fair value adjustment gain of N824.3 million vs N343.0 million adjustment loss in the corresponding quarter of 2019.

PAT margin was flat at 9.4% (relative to 2019) due to a 6.4pps YoY decline in the effective tax rate for the quarter.

Net operating cash flow rose by over seven-folds to N46.1 billion on strong working capital management.


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