March 3, 2022/FSDH Report
Key Performance Highlights:
- Dangote Sugar reported a 28.8% YoY revenue growth to N276.1 billion in FY21 from N214.3 billion in FY20. The growth is mainly contributed by the 30.3% rise in the 50 kg Sugar revenue segment and the sustained efforts to expand the customer base. The double-digit revenue growth was almost immediately offset, as the cost of sales shot up 43.8% YoY to N225.8 billion in FY21. The majority of the increase in the cost of sales is due to the rise in the raw material costs to N183.4 billion in FY21 from N119.4 billion in FY20, resulting in a gross margin contraction of 851 bps YoY to 18.2% in FY21, from 26.7% in FY20.
- Other income dropped from N906.9 million to N333.1 million in FY21, caused by a significant drop in the value of scrap sold to N46.6 million in FY21 from N396.9 million in FY20 and a considerable reduction in provisions reversal to N3.6 million in FY21 from N344.3 million in FY20. The company’s Selling and Distribution costs significantly increased by 33.9% YoY to N906.5 million in FY21. Administrative expenses rose 18.0% YoY to N10.6 billion in FY21. These factors lead to a decline in the company’s operating profit by 18.6% YoY to N39.0 billion in FY21.
- The poor operational performance was further exacerbated by a 23.0% YoY rise in finance costs, primarily due to an increase in the exchange loss to N1.9 billion in FY21 from N1.6 billion in FY20 and an increase in the finance cost of the letter of credit to N4.3 billion in FY21 from N3.5 billion in FY20. The Fair value adjustment also dropped 91.2% to N212.2 million in FY21 from N2.4 billion in FY20. Resultantly, the net profit tumbled 25.9% YoY to N22.1 billion in FY21. Earnings per share slipped to N1.82/share in FY21 compared to N2.45/share in FY20.
- For FY21, revenues from the Sugar- Retail segment (1.7% of FY21 revenues) declined 17.8% YoY to N4.8 billion in FY21, while the Freight income (0.6% of FY21 revenues) fell 15.2% YoY to N1.1 billion in FY21. On the other hand, 50 kg Sugar revenue (97.5% of FY21 revenue) spurted 30.3% YoY to N269.1 billion in FY21 and revenue from the Molasses segment (0.4% of FY21 revenues) charged 44.0% higher to N1.2 billion in FY21. In terms of geographical revenue distribution, revenue growth from the North was at 42.8% YoY, generating N113.2 billion revenues. Lagos sales generated N126.6 billion, 20.7% growth YoY. While revenue from the West and East was N25.3 billion and N10.9 billion, respectively, both reporting a 24.5% and 11.6% increase.
- Looking at margins, the gross margin suffered the most significant decline of 851 bps YoY to 18.2% in FY21. The company’s EBITDA margin also declined 846 bps YoY to 17.5% due to the increased cost of sales and selling expenses. The operating and net margin slumped 822 bps and 591 bps YoY to 14.1% and 8.0% in FY21, respectively. In a quarterly performance, the revenue growth of 49.8% YoY in 4Q21 was eclipsed by a sharp 118.5% increase in the cost of sales, leading to a 41.7% decrease in the gross profit to N13.5 billion in 4Q21 from N23.1 billion in 4Q20. This decrease in gross profit was further magnified, as selling and distribution expenses jumped 104.0% YoY to N368.2 million in 4Q21.
Market Reaction: The investor reaction to the weak bottom-line performance was negative as the stock declined 7.69% to N15.60 versus a 0.26% fall for the All-Share Index (2/3).
Dangote Sugar Earnings Highlights FY21
Source: Company Financials, FSDH