Dangote Sugar Refinery Plc - Expected Increase in the Prices of Raw Sugar: A Fresh Challenge

Proshare

Monday, November 17, 2014 5.35 PM / DLM Research

Production volume increases by 1.0% y/y while sales volume remains flat. In the nine months period to September 2014, Dangote Sugar recorded revenue of N73.80billion, down by 5.0% compared with N77.70billion in 2013. The decline in the revenue is a result of 8.7% reduction in the average prices of 50kg industrial sugar to N5,812 in the review period compared with average prices of N6,369 in the previous year. The company’s production quantity remains flat in the period with a marginal increase of 1.0% to 671,037 million tonnes against 664,656 million tonnes in 2013. The production level accounts for 63.0% capacity utilisation compared with 62.0% in the previous year and 99.1% of the production volume took place in Apapa Refinery Plant while the remaining were produced in Savannah Sugar Refinery Plant.

Similarly, sales volume increased marginally by 0.1% in the period to 609,888 million tonnes compared with 609,393 million tonnes in 2013. The period’s sales volume accounts for 90.0% of production relative to 91.7% in the previous year. On a geographical basis, Dangote Sugar reported revenue of N31.84billion from Lagos region, down by 6.8% compared with N34.16billion in 2013; the region’s revenue accounts for 43.1% of total revenue against 44.0% in the previous year. Also, the revenue of N31.47billion generated from Northern region which declined by 3.0% translates to 42.6% of total revenue relative to 41.8% in 9M2013.

Furthermore, the revenue of N8.06billion and N2.43billion realised from the western and the eastern region of Nigeria respectively were down by 5.4% and 5.3% and accounts for 10.9% and 3.3% of total revenue in that order compared with 11.0% and 3.3% in 2013. However, we are inclined to highlight that the security challenges in the northern part of Nigeria, which is one of the region where the company generates major revenue, poses a concern.

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