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
The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the south territory with a decline of 0.56 per cent on Wednesday, April 2.
This brought down the market capitalisation by N13 billion to N2.417 trillion from N2.430 trillion, and downed the NASD Unlisted Security Index (NSI) by 22.57 points to 4,062.87 points from the previous session’s 4,062.87 points.
It was observed that the NASD exchange ended with three price gainers and three price losers during the trading day.
MRS Oil Plc depreciated by N19.00 to close at N171.00 per unit compared with the previous price of N190.00 per unit, NASD Plc lost N4.14 to trade at N37.36 per share compared with Wednesday’s N41.50 per share, and Central Securities Clearing System (CSCS) Plc gave up N2.00 to sell at N78.00 per unit versus N80.00 per unit.
On the flip side, FrieslandCampina Wamco Nigeria Plc appreciated by 19 Kobo to N93.00 per share from N92.81 per share, Food Concepts Plc expanded by 15 Kobo to N2.87 per unit from N2.72 per unit, and Great Nigeria Insurance (GNI) Plc improved by 2 Kobo to 52 Kobo per share from 50 Kobo per share.
Yesterday, the volume of securities dipped by 91.8 per cent to 260.2 million units from 3.2 billion units, the value of securities went down by 98.1 per cent to N154.2 million from N8.3 billion, while the number of deals soared by 53.3 per cent to 46 deals from 30 deals.
GNI Plc was the most active stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by CSCS Plc with 56.9 million units valued at N3.9 billion, and Okitipupa Plc with 27.5 million units traded for N1.8 billion.
The most traded stock by volume on a year-to-date basis was also GNI Plc with 3.4 billion units sold for N8.2 billion, trailed by Resourcery Plc with 1.1 billion units exchanged for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units transacted for N1.2 billion.
By Adedapo Adesanya
The Naira dropped N2.09 or 0.15 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Thursday, April 2, to trade at N1,380.79/$1 compared with Wednesday’s rate of N1,378.70/$1.
However, it appreciated against the Pound Sterling in the official market by N2.77 to quote at N1,824.86/£1 versus the N1,836.57/£1 it was traded at midweek, and improved its value against the Euro by N10.54 to N1,591.92/€1 from N1,602.46/€1.
Yesterday was the last trading session of the week for the local currency in the spot market, as the market will be closed on Friday and Monday for the Easter Holiday.
At the black market, the Nigerian Naira maintained stability against the greenback yesterday at N1,405/$1, but gained N8 at the GTBank FX counter to settle at N1,388/$1, in contrast to the previous session’s N1,396/$1.
Pressure eased on the domestic currency as strong policy indicators have helped calm the majority of worries within the financial systems. Particularly in the remittance segment, the apex bank has directed all International Money Transfer Operators (IMTOs) to route remittance transactions through designated Naira settlement accounts in banks, a move aimed at boosting transparency and channelling more foreign exchange into the formal market.
This helps take off pressure from the foreign reserves, which have fallen below the $50 billion mark as they are gradually decreasing rather than falling sharply.
Meanwhile, the cryptocurrency market was bullish on Thursday, as macro sentiment shifted against recent optimism after reports that Iran is drafting a protocol with Oman to manage traffic through the Strait of Hormuz, easing concerns about disruptions to a key global oil route.
The remarks came after U.S. President Trump on Wednesday night vowed to hit Iran “extremely hard” in the coming weeks and that the Strait of Hormuz would “open naturally” once the war ends.
Cardano (ADA) chalked up 1.9 per cent to trade at $0.2435, Dogecoin (DOGE) grew by 1.2 per cent to $0.0912, Ethereum (ETH) appreciated by 0.8 per cent to $2,066.37, Bitcoin (BTC) added 0.5 per cent to sell at $67,080.53, Solana (SOL) increased by 0.5 per cent to $79.91, and Ripple (XRP) jumped 0.2 per cent to $1.31.
Conversely, Binance Coin (BNB) dipped 0.7 per cent to $586.90, and TRON (TRX) depreciated by 0.3 per cent to $0.3147, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
By Dipo Olowookere
The local stock market was relatively flat on Friday, as the bears and the bulls shared the spoils of war, though investor sentiment turned bullish compared with the preceding session’s bearish posture.
Data from the Nigerian Exchange (NGX) Limited showed that the All-Share Index (ASI) was marginally down by 4.66 points as it ended at 201,698.89 points versus Wednesday’s 201,703.55 points, and the market capitalisation slightly contracted by N3 billion to N129.806 trillion from N129.809 trillion.
Customs Street was shut on Friday because of the public holidays declared by the federal government today and next Monday.
Business Post reports that John Holt declined by 9.91 per cent to N15.45, Abbey Mortgage Bank shed 9.60 per cent to trade at N8.95, International Energy Insurance slipped by 6.48 per cent to N3.32, Chams shrank by 5.30 per cent to N3.75, and Tantalizers depreciated by 5.18 per cent to N4.03.
On the flip side, Unilever Nigeria improved by 10.00 per cent to N103.40, Fortis Global Insurance gained 9.82 per cent to trade at N1.23, Multiverse appreciated 9.81 per cent to N20.15, Legend Internet advanced by 9.38 per cent to N6.30, and Zichis grew by 9.02 per cent to N14.14.
The market breadth index was positive during the trading session, as there were 35 appreciating stocks and 24 depreciating stocks.
Yesterday, investors traded 560.0 million equities valued at N19.3 billion in 49,676 deals, in contrast to the 815.5 million equities worth N33.3 billion transacted in 52,641 deals in the preceding day, representing a drop in the trading volume, value, and number of deals by 31.33 per cent, 42.04 per cent, and 5.63 per cent, respectively.
Secure Electronic Technology dominated the activity log with 59.7 million shares valued at N61.1 million, Wema Bank exchanged 52.0 million equities worth N1.4 billion, VFD Group transacted 36.0 million stocks for N410.5 million, Access Holdings sold 35.3 million shares valued at N914.8 million, and Chams traded 31.0 million equities worth N115.0 million.
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