THUR. 02 MARCH 2023-theGBJournal | Dangote Sugar Refinery Plc (DANGSUGAR) announced its 2022FY audited financials today, reporting EPS of NGN4.51 (2021FY: NGN1.82). The EPS growth was driven by the stellar growth in sales (+46.1% y/y) and a decline in net finance costs (-34.3% y/y) in the period.
The achieved revenue was in line with Cordros Research analysts estimate (-1.3% variance), and Cordros says the EPS outturn surpassed their estimate (NGN2.87) by 57.1%, owing to a positive surprise in net finance costs.
The board proposed a dividend of N1.50/s, which implies a yield of 8.5% on the last closing price of NGN17.60 (01 March).
The company’s revenue increased markedly by 46.1% y/y in 2022FY, supported by the stellar increases across its business segments – 50kg Sugar (+45.3% y/y | 97.0% of revenue), Retail sugar (+65.9% y/y | 2.0% of revenue), Molasses (+80.4% y/y | 0.5% of revenue), and Freight income (+111.6% y/y | 0.6% of revenue).
Across its geographical footprint, DANGSUGAR recorded marked growth in revenue across all its regions – Lagos (+36.7% y/y), North (+58.0% y/y), West (+36.7% y/y) and East (+52.9% y/y).
A further perusal of the numbers reveals a significant growth in Q4-22 revenue (+42.7% y/y) to its highest ever print, driven by the festive induced demand typically associated with the end of the year.
Gross margin (+462bps) expanded to 22.8%, following the faster growth in revenue (+46.1% y/y) relative to cost of sales (+37.8% y/y). We highlight that the bulk of DANGSUGAR’s cost pressures emanated from the increase in input costs (+39.8% y/y) amid inflationary pressures and FX illiquidity issues.
Consequently, EBITDA (+536bps) and EBIT (+630bps) margins increased to 22.9% and 20.4% in the period, respectively, further buoyed by a 4.2% y/y decline in operating expenses.
Net finance costs outturn was the biggest surprise of the results in our view, as it declined by 34.3% y/y. We highlight that the decline was driven by significant spikes in the finance income (4.5x y/y) and fair value adjustment (15.6x y/y) lines, amid a 47.9% y/y increase in finance costs.
The significant expansion in finance income is attributable to the increase in interest income on deposits (2022FY: N6.38 billion | 2021FY: N1.42 billion). On the fair value adjustment, we note an increase in (1) total cane plantation to 8,092 ha (2021FY: 7,350 ha), and (2) industry out-grower assumed price/ton to N17,874 (2021FY: N12,502).
Notably, exchange rate loss which was a key sticking point across the year declined by 5.0% y/y to NGN1.89 billion (9M-22: N14.33 billion | 2021FY: N1.99 billion).
Overall, pre-tax profit grew by 141.9% y/y to NGN82.30 billion in 2022FY. Following a tax expense of N27.56 billion (Effective tax rate: 33.5%), profit after tax printed N54.74 billion in 2022FY.
Market reaction to the results have been positive as the stock is currently up by 9.9%.
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