Economy

Analysis of Dangote Sugar 2016 Performance

Published

9 years ago

11/04/2017

Modupe Gbadeyanka

**Posts Positive Performance Despite Input Costs Pressures

By Modupe Gbadeyanka

Dangote Sugar Refinery Plc delivered a remarkable financial performance in spite of elevated input cost within the financial year, as top line recorded a solid growth of 68 percent at N169.7 billion (FY 2015: N101.1 billion) and bottom line grew by 29 percent to N14.4 billion (FY 2015: N11.1 billion).

After a review of the company’s performance and based on our expectations, we project a fair value of N8.23 for Dangote Sugar and we assign a BUY rating on the stock.

The current market price of N6.00 implies a 27 percent discount to our fair value estimate of N8.23. DSR currently trades at a forward P/E and EV/EBITDA multiple of 4.82x and 4.97x, respectively.

FY’16 Performance Highlights:

Revenue grew markedly by 68% to N169.7bn (FY 2015: N101.1bn) on the back of major price increases within the year, while volume growth remained muted.

The average selling price in the year increased by 69% to N214.41/kg (N126.82/kg: FY’15), while sales volume was flat at 778,518mt (FY 2015: 778,000mt).

The major price hikes within the year were necessitated by the sharp rise in input costs as cost of sales increased by 82% to N146.7bn (FY 2015: N80.6bn), driven by a combination of increase in the international price of raw sugar, depreciation of the domestic currency, and higher energy costs.
The international price of raw sugar rose by 19% to an average of USD410.6 in 2016 (USD345.3 in FY 2015) while the domestic currency depreciated by 53% to further impact the cost of imported raw sugar. Also, gas supply interruptions led to the usage of more expensive low pour fuel oil (LPFO) and this aggravated energy costs.
DSR was, however, unable to fully pass the higher input costs to consumers through the several increases in selling price within the year as gross profit margin declined to 14% (FY 2015: 20%) and gross profit increased marginally by 12% to N23.0bn (FY 2015: N20.5bn).
Profit before tax grew by 21% to N19.6bn (FY 2015: N16.2bn) as fair value gains on biological assets of N2.5bn (FY 2015: N1.2bn) recorded in the year also supported bottom line. Profit after tax rose by 29% to N14.4bn (FY 2015: N11.1bn).

Our view

We expect revenue growth in FY 2017 to be driven primarily by volume. We believe the second phase of the crop season which kicked off in November ’16 from DSL’s backward integration drive will support more increases in production volume in H1 ’17. We expect volume sales to be driven by increase in market share as foreign exchange scarcity and higher imported sugar prices continue to subdue competition.

Ultimately, we believe lower international sugar prices, relative “stability” in the FX market and improved gas supply should ease input costs pressures and support profitability margins in FY 2017.

Valuation and rating

In estimating the fair value of DSR Plc, we adopted a combination of DCF and relative valuation methodologies. Our initial year cost of equity estimate of 19% was computed using a 10-yr risk-free rate of 15.80%, beta of 0.53 (relative to the NSE ASI) and an equity risk premium of 5.69%. We arrived at a fair value estimate of N8.23 per share.

Our fair value estimate implies a justified forward P/E multiple of 6.61x and EV/EBITDA multiple of 6.00x.
The current market price of N6.00 is at a 27% discount to our fair value estimate; hence, we rate the company’s stock a BUY.

Downside Risks to Valuation

The downside risks to our fair value estimate include:

Gas supply disruptions and increase in energy prices;
Further spike in international price of raw sugar;

• Devaluation of the domestic currency and the impact on the international price of raw sugar.

http://www.wstc.com.ng/uploads/reports/Earnings%20Update%20Dangote%20Sugar%20Refinery%20Plc.pdf

Economy

Food Concepts Return NASD OTC Exchange to Danger Zone

Published

8 hours ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.

Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.

This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.

Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.

Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.

At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.

InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.

Economy

Investors Gain N97bn from Local Equity Market

Published

8 hours ago

05/12/2025

Dipo Olowookere

By Dipo Olowookere

The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.

This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.

UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.

On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.

Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.

Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.

A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.

This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.

For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.

Economy

Naira Loses 18 Kobo Against Dollar at Official Market, N5 at Black Market

Published

9 hours ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

The Naira marginally depreciated against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, December 4 amid renewed forex pressure associated with December.

At the official market yesterday, the Nigerian currency lost 0.01 per cent or 18 Kobo against the Dollar to close at N1,447.83/$1 compared with the previous day’s N1,447.65/$1.

It was not a different scenario with the local currency in the same market segment against the Pound Sterling as it further shed N15.43 to sell for N1,930.97/£1 versus Wednesday’s closing price of N1,925.08/£1 and declined against the Euro by 20 Kobo to finish at N1,688.74/€1 compared with the preceding session’s N1,688.54/€1.

Similarly, the Nigerian Naira lost N5 against the greenback in the black market to quote at N1,465/$1 compared with the previous day’s value of N1,460/$1 but closed flat against the Dollar at the GTBank FX counter at N1,453/$1.

Fluctuations in trading range is expected to continue during the festive season as traders expect the Nigerian currency to be stable, supported by intervention s by to the Central Bank of Nigeria (CBN)in the face of steady dollar demand.

Support is also expected in coming weeks as seasonal activities, particularly the stylised “Detty December” festivities, will see inflows that will give the Naira a boost after it depreciated mildly last month, according to a new report.

“As the festive Detty December season intensifies, inbound travel, tourism spending, and diaspora inflows are expected to provide moderate support for FX liquidity,” analysts at the research unit of FMDA said in its latest monthly report for November.

Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450 next week, buoyed by improved FX interventions by the apex bank.

Meanwhile, the crypto market was down as the US Federal Reserve’s preferred inflation gauge, core PCE, likely rose in September—moving in the wrong direction. However, volatility indices show no signs of major turbulence.

If the actual figure matches estimates, it would mark 55 straight months of inflation above the US central bank’s 2 per cent target. The sticky inflation would strengthen the hawkish policymakers, who are in favour of slower rate cuts.

Ripple (XRP) depreciated by 4.5 per cent to $2.08, Solana (SOL) went down by 3.8 per cent to $138.11, Litecoin (LTC) shrank by 3.1 per cent to $83.23, Dogecoin (DOGE) slid by 2.5 per cent to $0.1463, Cardano (ADA) declined by 2.1 per cent to $0.4368, Bitcoin (BTC) fell by 0.9 per cent to $91,975.45, Binance Coin (BNB) crumbled by 0.9 per cent to $899.41, and Ethereum (ETH) dropped by 0.7 per cent to $3,156.44, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 apiece.