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 Dipo Olowookere
On the Nigerian Exchange (NGX) Limited last week, investors transacted 3.648 billion shares worth N220.568 billion in 251,861 deals compared with the 3.821 billion shares valued at N154.393 billion traded in 258,567 deals a week earlier.
Analysis showed that financial stocks led the activity chart with 2.899 billion units sold for N147.360 billion in 106,603 deals, accounting for 79.48 per cent and 66.81 per cent of the total trading volume and value, respectively.
Services equities recorded a turnover of 164.914 million units valued at N3.615 billion in 16,375 deals, and the consumer goods shares exchanged 157.451 million units worth N7.777 billion in 27,950 deals.
First Holdco, Zenith Bank, and Fidelity Bank were the busiest stocks for the five-day trading week, trading 1.745 billion units valued at N121.828 billion in 31,053 deals, contributing 47.85 per cent and 55.23 per cent to the total trading volume and value, respectively.
Business Post reports that 60 equities appreciated during the week versus 22 equities in the previous week, 28 shares depreciated versus 57 shares of the preceding week, and 58 stocks closed flat versus 67 stocks of the previous week.
International Breweries gained 40.00 per cent to trade at N13.30, RT Briscoe expanded by 32.02 per cent to N13.40, Livestock Feeds improved by 28.47 per cent to N9.25, First Holdco chalked up 25.82 per cent to close at N69.20, and Abbey Bank rose by 23.65 per cent to N9.15.
On the flip side, McNichols lost 28.57 per cent to finish at N5.00, Thomas Wyatt gave up 11.64 per cent to quote at N2.43, Geregu Power declined by 10.00 per cent to N825.70, CAP shed 9.99 per cent to settle at N157.60, and Guinness Nigeria also slipped by 9.99 per cent to N329.00.
Customs Street was under buying pressure last week, making the All-Share Index (ASI) and the market capitalisation close higher by 6.35 per cent to 243,798.76 points and N156.445 trillion, respectively.
In the same vein, all other indices finished higher apart from the growth and sovereign bond indices, which depreciated by 7.43 per cent and 0.02 per cent, respectively.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rose by 2.30 per cent, spurring the NASD Security Index (NSI) to close higher by 96.61 points to 4,296.34 points from 4,199.73 points, and raising the market capitalisation by N57.99 billion to N2.578 trillion from N2.521 trillion.
The market was up yesterday despite a lower activity level, as the volume of securities traded slumped by 94.7 per cent to 1.3 million units from the previous 23.9 million units. The value of securities slipped by 57.2 per cent to N29.2 million from the preceding session’s N68.2 million, while the number of deals executed by market participants increased by 6.7 per cent to 32 deals from the 30 deals carried out on Thursday.
At the close of transactions, Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with a turnover of 3.4 billion units worth N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units valued at N6.5 billion in trades, and Central Securities Clearing System (CSCS) Plc with 70.8 million units traded for N4.9 billion.
GNI Plc was also the most traded stock by volume on a year-to-date basis, with 3.4 billion units sold for N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
During the trading day, there were three price gainers and two price losers, led by Afriland Properties Plc, which shed N1.48 to sell at N15.17 per share compared with the previous session’s N16.65 per share, and Food Concepts Plc, which slid by 7 Kobo to close at N2.69 per unit versus N2.76 per unit.
Conversely, FrieslandCampina Wamco Nigeria Plc improved its value by N9.50 to trade at N150.00 per share compared with Thursday’s closing price of N140.50 per share, CSCS Plc went up by N7.95 to N89.65 per unit from N81.70 per unit, and 11 Plc soared by N6.94 to N206.95 per share from N200.01 per share.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited lost its footing by 0.07 per cent on Friday as a result of renewed profit-taking by investors.
The fall happened after Thomas Wyatt and Guinness Nigeria led other price losers group comprising 27 stocks at the market yesterday due to selling pressure.
Thomas Wyatt Nigeria shed 10.00 per cent to quote at N2.70, Guinness Nigeria drowned by 9.99 per cent to close at N329.00, Ikeja Hotel slipped by 9.96 per cent to N42.50, Zichis shed 9.94 per cent to trade at N26.37, and McNichols depreciated by 9.91 per cent to N5.00.
On the flip side, International Breweries gained 9.92 per cent to finish at N13.30, NEM Insurance appreciated by 9.61 per cent to N27.95, Jaiz Bank grew by 6.36 per cent to N9.20, UPDC expanded by 6.33 per cent to N4.20, and Livestock Feeds increased by 6.32 per cent to N9.25.
Business Post reports that investor sentiment remained bullish despite the loss recorded during the session, as there were 27 price decliners and 30 price advancers, representing a positive market breadth index.
Yesterday, market participants transacted 441.3 million equities for N19.4 billion in 44,938 deals compared with the 1.7 billion equities worth N112.0 billion traded in 44,780 deals a day earlier. This showed that the trading volume contracted by 74.04 per cent, the trading value declined by 82.68 per cent, and an uptick in the number of deals by 0.35 per cent.
Access Holdings led the activity chart on Friday after selling 40.2 million shares valued at N1.0 billion, Sterling Holdco traded 30.3 million stocks worth N228.8 million, Fidelity Bank sold 26.3 million equities for N505.6 million, Zenith Bank transacted 22.3 million shares valued at N2.5 billion, and First Holdco exchanged 19.0 million stocks worth N1.3 billion.
During the last trading session of the week, the consumer goods sector rose by 0.49 per cent, the insurance counter increased by 0.06 per cent, and the industrial goods index closed flat, while the banking and energy indices lost 0.78 per cent and 0.52 per cent, respectively.
As a result, the All-Share Index (ASI) shrank by 159.97 points to 243,798.76 points from 243,958.73 points, and the market capitalisation moderated by N103 billion to N156.445 trillion from N156.548 trillion.
