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A 37 percent drop in its 2018 nine-months profit after tax was all that was needed to reveal the telling signs competition is having on the operations of Dangote Sugar as revealed in results released to investors at the Nigerian Stock Exchange on Tuesday.
Profit after taxation for the period dropped to N16.7 billion from N26.5 billion recorded in the corresponding period in 2017.
According to consumer goods analysts at Cordros Capital, a Lagos based investment firm, the performance was due to the company’s struggle with competition from illegal imports, which have forced down prices significantly, as well as difficulty for both company and its customers in accessing the refinery located in traffic-congested Apapa.
The firm thus recorded a 28 percent depreciation in revenue of N116.8 billion as at September 2018 while earnings per share (EPS) was down 57 percent from 79 kobo in Q3’17 to 34 kobo as at Q3-18.
A further financial analysis of the firm’s financial by Cordros shows that “at 20.8 percent in Q3-18, gross margin was lower compared to both Q3-17 (32.9%) and Q2-18 (30.3%).”
Cordros consequently links the weak gross margin to both lower selling prices and efficiency losses from operating at much lower scale (currently about 43% utilization, vs. 53% historical average rate), as imported raw sugar prices trends lower (-29% YtD and -22% y/y in Q3-18) while exchange rate remains stable.
In reaction to the results, Dangote Sugar’s shares Tuesday fell 2.05 percent to close at N14.30 per share compared to the previous closing price of N14.60 per share, as investors exchanged 544,804 units of the shares worth N7.8 million in 58 deals.
