BREAKING: Dangote Sugar’s after-tax loss deepens as FX losses hit big

Dangote Sugar Refinery Plc has seen its after-loss deepen further after higher production costs and FX losses in 2024 dealt a blow on the company’s financials.......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>

But analysts are betting on the now stable naira and slowing inflationary pressures for the biggest sugar refiner to turn the tide of losses for the past two years and return to profitability.

The after-tax loss deepened to N192.6 billion in 2024 from N73.8 billion in 2023, highlighting the impact of the naira volatility.

“Dangote Sugar Refinery Plc reported a net loss of N192.62 billion in its FY’24 audited results, primarily due to rising production costs and significant foreign exchange losses,” analysts at Cardinalstone said in a note.

The firm’s production costs increased by 79 percent to N634.6 billion driven by raw material expenses which stood at N546.1 billion, direct overheads stood at N52.02 billion, and freight expenses of N18.3 billion, direct labour cost of N9.13 billion and depreciation of N9.05 billion.

Despite the increased production cost, revenue grew 51 percent driven by price increases across its product range, with sugar-50kg up 51 percent, sugar-retail up 52.3 percent, and molasses up 81.9 percent.

Though losses were made, its revenue nonetheless grew 51 percent to N665.690 billion. The firm recorded net cash of N38.2 billion in 2024 as against net borrowing of N204.2 billion in 2023. Borrowings surged to N146.3 billion from N531.6 billion.

Dangote Sugar’s share price stood at N34.5 an increase from N32.5 at the beginning of the year.

“Dangote Sugar’s reliance on imported sugar cane amid exchange rate volatility continued to hurt operating profit as the cost of gobbled up 95 percent of revenue. The group made a negative profit before and after tax of N280.9 billion and N192.6 billion in 2024, as rising finance costs (due to FX exposure and debt servicing) and administrative expenses sliced down the company’s gross profit,” Proshare report stated.

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It stated that the sugar maker leveraged wholesale and retail price adjustments to improve its income streams and achieve 50.8 percent growth in revenue to N665.69 billion in the full year of 2024.

“A further breakdown showed that the sale of sugar (wholesale) accounted for 97 percent, while retail sugar and molasses sales accounted for 3 percent,” Proshare stated.

Dangote sugar’s return on assets ratio stood at -18.34 percent in 2024 from -12.28 percent in 2023 while returns on equity stood at -90.8 percent from -93.07 percent.

Net profit margin stood at -28.9 percent from -16.7 percent in the comparable period.

Finance income declined by 27.9 percent to N7.61 billion. Cardinalstone analysts stated that the firm’s finance income dropped due to lower interest earnings on bank deposits.

“These factors resulted in a pre-tax loss of N270.89 billion, though a tax credit of N78.28 billion helped moderate the net loss to N192.62 billion,” Cardinalstone analysts said.

Extreme weather conditions have negatively impacted sugar cane production, which was compounded by India’s sugar export ban pushing global prices higher in 2024.

Rising global sugar prices helped significant sugar producers. However, Nigeria’s inability to meet the sugar production and export milestones set by the National Sugar Master Plan’s backward integration program scuttled the benefits of a global sugar price rally in 2024.

In the medium term, Dangote Sugar is targeting an additional 1.5MMT of refined sugar from locally grown sugarcane and is on track to becoming a leading global integrated sugar producer with its backward integration plan.