Background
Dangote Sugar Refinery (DSR) is a part of the Dangote group, one of the most diversified business conglomerates in Africa. Dangote commenced operations in March 2000 as the sugar division of Dangote Industries Limited.
The group initially entered the sugar business in 1978 through importation and trading of sugar and subsequently commenced sugar production in 2000 by commissioning a port based sugar refinery at Apapa port in 2001. The sugar division was spun off as Dangote Sugar Refinery Plc via a scheme of arrangement in January 2006 which transferred all the assets, liabilities and undertakings attributable to the Sugar division of Dangote Industries Limited.
The company’s factory was designed and built by Tate and Lyle, UK with an initial production capacity of 60000 MT/annum of raw sugar.
This was increased to 1.44 million MT/annum in 2004 making it the largest sugar refinery in sub Sahara Africa and the second largest in the world.
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In its desire to fully integrate its sugar operations, Dangote Sugar Refinery in January 2013, announced the acquisition of Savannah Sugar Company Limited, a company involved in sugar cane farming and milling
Political unrest in the northern part of the country slows growth
For the first nine months through September 2014, the company’s revenue reduced by 5 per cent to N73.79 billion from N77.70 billion the same period of the corresponding year (Q3) 2013.
The slow growth at the top line can be attributed to the intense unrest in the northern part of the country which has significantly reduced consumer spending in the region.
Additionally, the company’s newly acquired subsidiary – Savannah Sugar located in Adamawa has had production disrupted by incessant attacks from the monstrous Boko Haram Insurgents.
The bedlam in the north has also hindered the DSR from pushing its products outside the borders of the country to neighbouring countries such as Chad which is the hot spot of the insurgents.
DSR’s cost of sales were down by 4.03 per cent to N57 billion as against N59.38 billion last year as the company’s cost control mechanisms is yielding fruits.
In spite of the reduction in input costs, the company was unable to control direct costs attributable to projects as gross profit fell by 8.30 per cent to N16.80 billion as against N18.32 billion the preceding year.
Pre – tax profit fell despite reduced operating expenses.
Despite a reduction in operating expenses by 52.43 per cent and a 52.43 per cent decrease in operating expenses to N3.13 billion from N6.58 billion last year, the company’s profit before tax (PBT) still fell slightly by 6.55 per cent to N13.95 billion compared with N14.95 billion the preceding year.
Profit after tax (PAT) in the review period increased by 5 per cent to N9.14 billion as against N9.62 billion as income tax liability reduced by 9.22 per cent to N7.82 billion
Moderate balance sheet growth.
Total assets were up by 3.11 per cent to N81.54 billion compared with N84.16 billion last year. The company has an impressive inventory policy in the review period as total inventories were reduced by 32.45 per cent to N14.14 billion while debtors and other receivables reduced by 25.82 per cent to N12.58 billion.
Stellar performance awaits the company as industry investments in sugar soars.
Nigeria’s sugar Industry is in a growth spurt as four key players are planning on pumping in as much as $2.57 billion into the industry.
The copious investment is expedient as a result of sharp increased in demand to 2 million metric tonnes (MT) as at the end of 2013, from 1.5 million MT recorded by the end of 2012, information from the National Sugar Development Council (NSDC) has shown.
Dangote Sugar is coming up with $2 billion investment in six states in the country through its recently acquired Savannah Sugar plc in Numan, Adamawa State, and North-East Nigeria. Its target is 1.5 million MT and expansion from current 6,500 hectares (ha) to 21,000 ha to produce 100,000 tonnes of sugar annually by 2018.
BALA AUGIE
