Economy
Dangote Sugar: Price Hikes Sweeten Earnings
By ARM Securities
Over 2016, Dangote Sugar Refinery Plc (DSR) reported an upsurge in earnings despite lingering pressures: currency weakness, elevated raw sugar prices and higher energy cost.
Solid earnings reflected the steep hike in refined sugar prices as well as volumes resilience hinged on the largely non-discretionary nature of DSR’s product.
In addition, the company improved its financial efficiency by refinancing its expensive debt with CBN’s concessionary borrowings which, together with support from higher revaluation gains on biological assets, capped an impressive year for the company. In view of this, the company raised its DPS to N0.60 (2015: N0.50).
Going forward, whilst we expect volumes to track lower as corporate institutional clients seek cheaper alternatives, revenue should maintain its upswing on the back of higher prices.
Aided by the impact of stronger naira (at the parallel market) on COGS, cheaper borrowings, as well as improved cash position, we expect earnings to rise for the second consecutive year in 2017.
Over 2016, DSR faced sizable input cost pressures as steep naira depreciation combined with bullish raw sugar prices (+40% YoY) to drive cost of raw materials nearly two-fold higher YoY. To add, energy cost surged as lower gas supply compelled the company to rely on increased utilisation of more expensive alternative (LPFO).
Furthermore, OPEX tracked higher (+12% YoY) following upswing in S&D cost which mirrored movement in PMS prices.
Faced with sizable input cost pressure, DSR responded by hiking refined sugar prices 68% YoY (9M 16: +36.3% YoY) to N10,900/50kg bag on average.
Though volume growth consequently suffered in the final quarter of the year (YoY: 9M 16: +16%, Q4 16: -33%), overall sales in the year was flat at 778.5KMT to leave DSR’s topline printing at a record high of N169.7 billion over FY 16
In a bid to minimize margin compression, DSR substituted its more expensive intercompany loan (interest rate at 13.5% per annum) with concessionary CBN financing (9% per annum). Aided by improved cash position, stemming from efficient working capital management, the company reported net finance income of N302 million vs. net interest charge of N653 million in FY 2015.
In addition, the company reported a more than two-fold YoY rise in fair value adjustments on biological asset reflecting improved yield and longer tenor life.
Consequently, mainly riding on pass-through from strong top-line growth, DSR reported its fastest earnings growth in four years.
Going forward, we expect the latest round of price hike to N17,000/50kg bag to keep average refined sugar prices 56% higher relative to 2016.
That said, amidst increasing desire for cheaper substitutes by DSR’s corporate institutional clients (30% of overall revenue) as well as potential cutback in indirect exports, on the back of recent naira gains at the parallel market, we expect some volume contraction in the current year (FY 17E: -13% YoY to 674KMT).
Nonetheless, largely reflecting higher prices, we project revenue growth of 34% over FY 17 to N227.6billion.
On cost, whilst higher raw sugar prices should ordinarily stoke COGS pressures, we are now more sanguine on input cost in view of increased gas supply and currency appreciation at the parallel market which we believe should temper pressures from global raw sugar prices.
Specifically, we project a 1.5pps YoY decline in COGSSales ratio to 85% with COGS at N193.5billion (+32% YoY). In addition, we think the company’s sizable cash position and debt refinancing bode positively for net finance income, which we project to climb 14% YoY. Overall, reflecting higher pricing and financial efficiency, we expect earnings to print at N16.3billion, which translates to 13% increase from FY 16 level.
DSR trades at a current P/E of 6.4x vs. 16.4x for Bloomberg Middle East & Africa peers. The stock has gained 0.16% YTD (Food: -7.3% YTD, NGSE: -4.6%) with last trading price of N6.12 at a 32% discount to our FVE of (N8.08). We have a BUY rating
Source: www.armsecurities.com.ng.
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Economy
BNB Price Reflects Changing Dynamics in the Digital Asset Market
Economy
NASD Unlisted Security Index Crosses 4,000-point Benchmark Again
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange achieved a milestone on Friday, April 24, 2026, after five securities on the platform helped with a 1.85 per cent growth.
Data showed that the NASD Unlisted Security Index (NSI) again crossed the 4,000-point benchmark yesterday.
The index chalked up 73.64 points during the trading day to close at 4,052.59 points compared with the preceding session’s 3,978.95 points, while the market capitalisation added N5.38 billion to finish at N2.424 trillion versus Thursday’s closing value of N2.380 trillion.
The price gainers were led by Okitipupa Plc, which grew by N25.00 to sell at N305.00 per share compared with the previous price of N280.00 per share. Central Securities Clearing System (CSCS) Plc gained N6.92 to close at N76.26 per unit versus N69.34 per unit, Afriland Properties Plc appreciated by N1.00 to N17.00 per share from N18.00 per share, FrieslandCampina Wamco Nigeria Plc improved by 55 Kobo to N99.55 per unit from N99.00 per unit, and Food Concepts Plc increased by 5 Kobo to N2.70 per share from N2.65 per share.
However, there was a price loser, MRS Oil, which dipped by N21.75 to N195.75 per unit from N217.50 per unit.
During the final session of the week, the value of securities jumped 75.2 per cent to N41.3 million from N23.6 million units, and the number of deals expanded by 62.9 per cent to 44 deals from 27 deals, while the volume of securities declined marginally by 0.9 per cent to 447,403 units from 451,522 units.
At the close of trades, Great Nigeria Insurance (GNI) Plc was the most traded stock by volume (year-to-date) with 3.4 billion units worth N8.4 billion, trailed by Resourcery Plc with 1.1 billion units valued at N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
GNI was also the most active stock by value (year-to-date) with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 59.6 million units transacted for N4.0 billion, and Okitipupa Plc with 27.8 million units exchanged for N1.9 billion.
Economy
Naira Slips to N1,358/$1 as FX Reserves, Policy Uncertainty Concerns
By Adedapo Adesanya
It was not a good day for the Nigerian Naira in the currency market on Friday, April 24, as its value depreciated against the major foreign currencies at the close of transactions.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX), it lost N4.53 or 0.33 per cent against the United States Dollar yesterday to trade at N1,358.44/$1, in contrast to the N1,353.91/$1 it was exchanged on Thursday.
Equally, the domestic currency slipped against the Pound Sterling in the official market during the session by N8.14 to close at N1,834.02/£1, compared with the previous rate of N1,825.88/£1 and dropped N8.01 against the Euro to sell at N1,590.73/€1 versus N1,582.72/€1.
Also, the Naira depreciated against the US Dollar at the GTBank FX desk on Friday by N4 to quote at N1,370/$1 compared with the previous session’s N1,366/$1, and at the parallel market, it depleted by N5 to settle at N1,380/$1 versus the preceding day’s N1,375/$1.
Data published by the Central Bank of Nigeria (CBN) indicated that NFEM interbank turnover surged to N43.562 million across 68 deals, up from N28.117 million the previous day.
Despite the CBN’s reassurance that the recent drop in external reserves is not worrisome, the market remains unsettled by persistent concerns over liquidity constraints, policy transparency, and weakening confidence in Nigeria’s FX market as gross reserves continue to decline to $48.4 billion.
The outlook for the Dollar appears supported by broader macro risks, including elevated oil prices tied to the tanker traffic disruptions in the Strait of Hormuz and a continued US-Iran standoff over ceasefire negotiations.
A look at the digital currency market showed that investors are sitting on the edge as the US Dollar rebounded amid geopolitical and inflation risks despite continued inflows into US spot bitcoin Exchange Traded Funds (ETFs).
Solana (SOL) rose by 1.2 per cent to sell $86.45, Cardano (ADA) appreciated by 1.1 per cent to $0.2517, Dogecoin (DOGE) grew by 0.9 per cent to $0.0989, Ripple (XRP) improved by 0.3 per cent to $1.43, Ethereum (ETH) soared by 0.2 per cent to $2,316.83, and Binance Coin (BNB) chalked up 0.1 per cent to sell for $637.44.
However, TRON (TRX) depreciated by 1.3 per cent to $0.3235, and Bitcoin (BTC) lost 0.2 per cent to close at $77,562.27, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
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