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Dangote Sugar Nigeria Plc, Nigeria’s biggest sugar refiner which commenced operations in March 2000, saw revenue spike 83 per cent year-on-year (YOY) in the first quarter (Q1) that ended in March, 2017. The revenue surge was driven by 121 per cent YOY increase in price.
The company’s Q1 result released on Friday last week shows that earnings before interest, tax, depreciation and amortisation (EBITDA), which measures the company’s operating performance, rose 14 per cent to beat consensus analysts’ estimates. Profit after tax (PAT) hopped 43 per cent above Q1 2016 levels.
“Increase in price is one of the drivers of improved performance,” said Abdullahi Sule, Acting group managing director, Dangote Sugar Refineries Plc , in an interview with CNBC Africa on Tuesday. “Cost savings is also another factor. Volume has also increased as we are now getting business from some of the traditional customers who have not done business with us before.”
Dangote sugar crawled up by 0.02 per cent from N6.22 as trading resumed on the nations bourse, The Nigerian Stock Exchange on Tuesday. An update made available by Lagos-based investment managers, Cordros Capital, said that the company sold 174,981 tonnes of sugar during the period, 7 per cent more than the 164,129 tonnes sales volume of the fourth quarter of 2016.
The company’s sugar refining plant was commissioned in 2001 with an initial annual capacity of 600,000 metric tonnes (MT); it has since grown its capacity to 1.44 million MT, making it one of the largest refineries in the world, according to information from the company’s website.
The company plans a backward integration strategy in attempt to control raw material input supplies to increase efficiency and save cost.
Sule said that the backward integration will be carried out in phases, with the first to be executed in the next three years. This phase is projected to consume up to N100 billion, according to the company’s acting boss; part of the money will be raised from fresh issue of debt as Sule says the equity component will come from the company’s retained earnings.
“The board has already taken a position that 20 per cent of that is going to be equity. Equity is going to come internally from our own company,” said Sule, who also stressed that the company is not encumbered by any debt burden.
“You know our Company actually has zero debt. As a result of the zero debt, we have some cash reserve with which we should be able to fund our 20 per cent (equity contribution). Before going to the market we are using part of our equity for the 20%.”
Sule confirmed that the company will be seeking money from investors in the near future, adding that the management is putting together a package at the moment in preparation for the imminent capital raising exercise.
“It is up to the board to decide but we have not taken a decision on whether it is going to be this year or early next year,” he said.
INNOCENT UNAH
