FRI MAY 03 2024-theGBJournal| While strategic price increases supported Dangote Sugar Refinery Plc’s (DANGSUGAR) topline performance in Q1-24, margins and eventual earnings remained under pressure from rising costs and FX illiquidity challenges, as gleaned from its unaudited financials recently released.
The top sugar producer, in the financials reported a loss per share of N5.68 (vs EPS of N1.05 in Q1-23) due to the combined impact of a 22.5x y/y increase in net exchange losses to N102.98 billion (Q1-23: N4.38 billion), higher cost of sales (+49.0% y/y), and OPEX (+24.9% y/y).
Revenue grew by 20.1% y/y in Q1-24, driven by increases in all its product lines – 50kg Sugar (+18.5% y/y | 95.3% of revenue), Retail sugar (+84.2% y/y | 3.4% of revenue) and Molasses (+119.7% y/y | 1.2% of revenue) – save for Freight income (-77.4% y/y | 0.1% of revenue).
The revenue growth in the period was primarily supported by higher prices. Across its business segments, revenue from the North (-22.6% y/y) and East (-8.3% y/y) were the only laggards, as the company recorded growth across its Lagos (+76.9% y/y) and Western (+3.4% y/y) segments.
Sequentially, revenue declined by 6.8% q/q, attributed to lower demand after the festive period-induced consumption subsided.
Gross margin (-18.06 ppts y/y) plummeted to 7.1%, following a 49.0% y/y growth in the cost of sales. The increase in costs was mainly driven by rises in production costs from the cost of materials (+55.9% y/y) and direct overheads (+39.4% y/y).
Indeed, the price of raw sugar was higher by 8.6% YTD. Consequently, EBITDA (-18.10ppts y/y) and EBIT (-18.09ppts y/y) margins contracted significantly to 6.6% and 4.3% in the quarter, respectively, amid a 24.9% y/y increase in operating expenses, owing to the currency devaluation in the period.
Net finance costs (+21.0x y/y) surged in the quarter, owing to a 22.5x y/y increase in net exchange losses to N102.98 billion (Q1-23: N4.38 billion) amid a higher interest charge (+410.3% y/y) on letters of credit.
Overall, DANGSUGAR posted a pre-tax loss of N106.86 billion in the quarter (vs. a pre-tax profit of N18.53 billion in Q1-23).
Following a tax credit of N37.86 billion (vs. a tax expense of N5.73 billion in Q1-23), the loss after tax printed N68.99 billion (vs. a profit after tax of N12.80 billion in Q1-23).
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