Naira Devaluation Tips Dangote Sugar Into Net Loss as Stock Down 10%

Dangote Sugar Refinery Plc swung into net loss in the second quarter (Q2) following a currency devaluation, despite an uptick in revenue that got bolstered by price adjustment.

Investors in the days trading on the NGX sold off the shares, sending it down -10% to close at N27 per share.

The largest producer of the sweetener posted a loss after tax of N27.98 billion loss after tax in June 2023 as it booked foreign exchange loss of N83.03 billion, adding to the list of firms that capitulated to macroeconomic headwinds.

The central bank lifted the peg on the exchange rate effectively ending intervention (unless the need arises) at the Investors and Exporters (I&E) window. This resulted in a 63 percent slump in the value of the Naira. In addition, all the existing official FX windows were collapsed into the I&E FX Window.

Of course, Nigerian firms with foreign currency obligations are hard hit from Naira’s bad run and the fear is that the currency volatility could extend till the first quarter of next year.

Nestle Nigeria and Cadbury recorded negative shareholders’ fund or were technically insolvent due to a combined foreign exchange losses of N142.30 billion.

Analysts say a further dent at the bottom line of firms could force them to downsize or cut down on staff to stay afloat.

It is worth noting that losses from foreign currency transactions are a one off event, and that means Dangote Sugar could still turn a profit soon.

Dangote Sugar’s gross profit spiked by 50 percent to N58.18 billion as at June 2023 from N38.81 billion the previous year.

The largest producer of the sweetener is still marking profit from core operations as operating profit spiked by 53 percent to N52.19 billion as at June 2023.

The market reacted to the news as Dangote Sugar’s shares lost 3 percent to close at N27 as of 2:30 pm in Lagos.