Economy
Dangote Sugar Outlook Remains Positive Despite Market Share Dropping to 60%
By Modupe Gbadeyanka
The 2017 financial year was good for Dangote Sugar Refinery Plc despite some challenges the company faced.
During the year, the firm had to deal with less expensive sugar smuggled into the country, which impacted on its sales and market share, which dropped to 60 percent.
But despite this, the company managed to grow its revenue by 20 percent year-on-year, while the average selling prices went up by 43 percent y/y to offset a 16 percent y/y decline in sugar volumes sold during the year.
According to Ifedayo Olowoporoku of Vetiva Capital Management Limited, the top line figure came in at a record high of N204 billion, marginally below expectation.
She said the deviation was largely driven by lower than expected volume rollout in Q4’17 (3 percent q/q rise versus 11 percent Vetiva estimate) as well as some price cut recorded within the quarter.
Vetiva said whilst management noted that government’s effort to curtail smuggling has been somewhat impactful, the company has had to take further price cuts in 2018 amidst intense competition (Current price: c.N280,000/ton vs. FY’17 average: N312,720/ton).
Also worthy of note is the shift in regional sales breakdown with percentage of volumes to Lagos and other Western region moderating significantly to 37 percent (FY’16: 59 percent, FY’15: 56 percent).
According to Vetiva, the terrible road conditions around the Apapa environs in Lagos continue to impact business negatively.
From the analysis, supported by well contained Operating Expenses, stronger (y/y) selling price, as well as moderation in FX related production cost, FY’17 EBIT margin rose to 23 percent (FY’16: 10 percent).
With this, EBIT rose by 171 percent y/y to N47 billion, albeit 12 percent lower than had expected as price cuts in Q4’17 drove a 970bps q/q moderation.
Bottom line was further supported by an extraordinary Finance Income of N4.3 billion in Q4’17 (attributed to exchange rate gains) as well as N3.3 billion Investment Income recorded for FY’17 (FY’16: N601 million).
Overall, FY’17 PAT came in 8 percent above estimate at N39.8 billion, a significant leap from N14.4 billion recorded in FY’16. The Board proposed a final dividend of N1.25 (Total dividend: N1.75, Dividend yield: 13 percent).
Given improved FX liquidity and porous borders, Vetiva expects threat from smuggled sugar to remain pronounced in 2018. As such, it revised its Revenue forecast lower to N189 billion amidst lower y/y prices and volumes – particularly given previous year’s high base.
Though sustained stability in gas supply and benign global raw sugar prices are expected to support margins, the firm revised its FY’18 EBIT margin estimate 100bps lower to 22 percent (Previous: 23 percent; historic average of 20 percent) amidst lower selling prices.
“Also driven by our expectation of normalization in FX related gains, we estimate a N29 billion PAT for FY’18. We revise our 12 Month Target Price to N20.60 and maintain a HOLD rating on the stock. Dangote Sugar trades at a forward P/E of 9.0x vs Consumer Goods Coverage P/E of 22.0x.
“We note that the medium term outlook for Dangote Sugar remains largely positive – supported by the company’s backward integration project ‘Sugar for Nigeria’ where 1.08 million MT/PA of refined sugar is expected to be sourced from locally grown sugarcane across five sugar factories,” Vetiva said.
By Adedapo Adesanya
Seven price gainers flipped recent declines at the NASD Over-the-Counter (OTC) Securities Exchange, raising the alternative stock market by 2.19 per cent on Friday.
According to data, the market capitalisation added N51.24 billion to end N2.389 trillion compared with the previous day’s N2.338 trillion, while the NASD Unlisted Security Index (NSI) climbed 85.65 points to close at 3,994.32 points, in contrast to the 3,908.67 points it ended a day earlier.
Business Post reports that the advancers were led by MRS Oil Plc, which improved its value by N13.00 to N200.00 per share from N187.00 per share, FrieslandCampina Wamco Nigeria Plc gained N7.40 to settle at N91.55 per unit versus the previous day’s N84.15 per unit, Central Securities Clearing System (CSCS) Plc appreciated by N6.08 to N71.00 per share from N64.92 per share, Afriland Properties Plc added 66 Kobo to finish at N17.17 per unit versus N16.51 per unit, IPWA Plc rose 37 Kobo to N4.15 per share from N3.78 per share, First Trust Mortgage Bank Plc grew by 11 Kobo to N1.20 per unit from N1.09 per unit, and Food Concepts Plc went up by 10obo to N3.70 per share from N3.60 per share.
On the flip side, there were two price losers led by Geo-Fluids Plc, which depreciated by 28 Kobo to N3.32 per unit from N3.60 per unit, and Industrial and General Insurance (IGI) Plc dropped 5 Kobo to sell at 45 Kobo per share from 50 Kobo per share.
Yesterday, the volume of trades went down by 92.0 per cent to 3.7 million units from 45.8 million units, the value of transactions fell by 59.4 per cent to N84.5 million from N208.2 million, while the number of deals went up by 7.7 per cent to 42 deals from 39 deals.
CSCS Plc remained the most traded stock by value (year-to-date) with 32.6 million units exchanged for N1.9 billion, trailed by Geo-Fluids Plc with 119.6 million units valued at N470.3 million, and Resourcery Plc with 1.05 billion units traded at N408.6 million.
Resourcery Plc closed the day as the most traded stock by volume (year-to-date) with 1.05 billion units sold for N408.7 million, followed by Geo-Fluids Plc with 119.6 million units worth N470.3 million, and CSCS Plc with 32.6 million units worth N1.9 billion.
By Adedapo Adesanya
The Naira weakened further against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, February 20, by N4.97 or 0.37 per cent to N1,346.32/$1 from the N1,341.35/$1 it was transacted on Thursday.
Heightened FX demand tilted the market toward the downside yesterday, exerting upward pressure on rates despite efforts by the Central Bank of Nigeria (CBN) to stabilise the foreign exchange market.
Also in the official market, the domestic currency depreciated against the Pound Sterling during the session by N9.39 to sell for N1,815.25/£1 versus the previous day’s N1,805.86/£1, and lost N7.33 against the Euro to close at N1,584.62/€1 compared with the preceding session’s N1,577.29/€1.
The story was not different for the Nigerian Naira at the GTBank FX desk, where it depleted against the Dollar by N7 on Friday to quote at N1,356/$1 versus the N1,349/$1 it was sold a day earlier, but remained unchanged in the black market at N1,370/$1.
It was observed that risky sentiment among Foreign Portfolio Investors (FPIs) contributed to the FX market, amid fears of hot money flight due to capital gains tax and other factors.
As for the cryptocurrency market, it was mostly green yesterday in reaction to a Supreme Court verdict dismissing a fresh 10 per cent global levy by President Donald Trump.
The apex court on Friday described Mr Trump’s global tariff rollout as illegal. The decision did not clarify what should happen to tariff revenue already collected, and it doesn’t necessarily spell the end of the trade agenda, with multiple legal and executive avenues still available.
Litecoin (LTC) grew 2.7 per cent to $55.00, Cardano (ADA) appreciated 2.6 per cent to trade at $0.2815, Binance Coin (BNB) expanded by 2.6 per cent to $627.19, Dogecoin (DOGE) recouped 1.3 per cent to quote at $0.1, Ripple (XRP) jumped 0.7 per cent to $1.43, Solana (SOL) improved by 0.5 per cent to $84.15, and Ethereum (ETH) soared 0.1 per cent to $1,962.78.
However, Bitcoin (BTC) lost 0.2 per cent to sell for $67,850.49, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Dipo Olowookere
A further 0.99 per cent was gained by the Nigerian Exchange (NGX) Limited on Friday after a positive market breadth index supported by 53 price gainers, which outweighed 23 price losers, representing bullish investor sentiment.
During the trading day, the trio of Jaiz Bank, Fidson, and NPF Microfinance Bank chalked up 10.00 per cent each to sell for N11.00, N86.90, and N6.27, respectively, while Deap Capital appreciated by 9.96 per cent to N7.62, and Mutual Benefits increased by 9.94 per cent to N5.42.
Conversely, Secure Electronic Technology shed 10.00 per cent to trade at N1.62, Sovereign Trust Insurance slipped by 9.73 per cent to N2.32, Ellah Lakes declined by 7.91 per cent to N12.80, International Energy Insurance retreated by 5.56 per cent to N3.40, and ABC Transport moderated by 5.26 per cent to N9.00.
Data from Customs Street revealed that the insurance counter was up by 2.52 per cent, the industrial goods sector grew by 2.28 per cent, the banking space expanded by 1.43 per cent, the consumer goods index gained 1.23 per cent, and the energy industry rose by 0.05 per cent.
As a result, the All-Share Index (ASI) went up by 1,916.20 points to 194,989.77 points from 193,073.57 points, and the market capitalisation moved up by N1.230 trillion to N125.164 trillion from Thursday’s N123.934 trillion.
Yesterday, investors traded 820.5 million stocks valued at N28.3 billion in 63,507 deals compared with the 898.5 million stocks worth N38.5 billion executed in 61,953 deals, showing a jump in the number of deals by 2.51 per cent, and a shortfall in the trading volume and value by 8.68 per cent and 26.49 per cent apiece.
Closing the session as the most active equity was Mutual Benefits with 79.0 million units worth N427.1 million, Zenith Bank traded 44.0 million units valued at N3.8 billion, Chams exchanged 43.9 million units for N182.0 million, AIICO Insurance transacted 42.4 million units valued at N179.8 million, and Veritas Kapital sold 36.0 million units worth N90.6 million.
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