March 4, 2024/CSL Research

In its FY 2023 audited earnings result, Dangote Sugar Refinery Plc’s (DSR) Revenue rose to N441.45bn (+9.5% y/y) from N403.25bn in 2022. The company’s topline performance was largely driven by the accretion in its sales of sugar (50kg), sugar (retails) and molasses to N426.45bn (+9.1% y/y), N11.46bn (+45.3% y/y) and N2.29bn (+6.5% y/y) respectively while its freight income declined by 43.6% y/y to N1.26bn in 2023. On a q/q basis, DSR’s revenue grew by 23.2% to N131.74bn in Q4 2023 from N106.93bn in Q3 2023.

The company’s Cost of Sales (adjusted for depreciation) advanced by 14.3% y/y to N349.19bn in 2023 from N305.44bn in 2022. The uptick in DSR’s cost of sales was driven by the all-round rise in its input costs except freight expenses (raw material, direct labour cost, direct overheads). This resulted in a decline in DSR’s Gross Profit to N92.26bn (-5.7% y/y) in 2023 from N97.80bn in 2022 bringing the gross profit margin down to 20.9% (-3.4ppts) in 2023 from 24.3% in 2022.

DSR’s Operating Expenses (adjusted for depreciation) advanced by 39.1% y/y to N9.96bn (+39.1% y/y) from N7.16bn in 2022. Thus, the company’s OPEX margin settled at 2.3% in 2023 from 1.8% in 2022. The Administrative Expenses (adjusted for depreciation) contributed the most to the company’s total opex as it increased by 35.1% y/y to N11.30bn in 2023 from N8.36bn in 2022.

The company reported an impairment loss on financial assets of N926m in 2023 from a gain of N64m in 2022. Consequently, DSR’s EBITDA settled at N81.38bn in 2023 from N90.71bn in 2022 leading to an EBITDA margin of 18.4% in 2023 (-4.1ppts) from 22.5% in 2022. Its Depreciation and Amortisation was up by 2.0% y/y to N9.93bn in 2023 from N9.73bn in 2022. The company reported a significant growth of 186.4% y/y in its fair value adjustment to N9.50bn in 2023 from N3.32bn in 2022. Overall, its Operating Profit was down by 11.8% y/y to N71.45bn in 2023 from N80.98bn in 2022.

DSR’s Other Income declined by 14.1% y/y to N1.23bn in the period from N1.44bn in 2022. Thus, its Earnings Before Tax (EBIT) was down by 4.1% y/y to N82.18bn in 2023 from N85.73bn in 2022. The growth of 65.5% y/y to N10.56bn in 2023 (vs N6.38bn in 2022) in its Finance income was eroded by the large jump in its Finance Cost to N201.66bn in 2023 from N9.80bn in 2022. The jump in its Finance Cost was largely driven by a steep growth in its exchange loss to N172.20bn in 2023 from N1.89bn in 2022. Overall, the company’s Net Finance Cost grew to N191.10bn in 2023 from N3.42bn in 2022.

​​Consequently, DSR reported a Loss Before Tax of N108.92bn in 2023 from a Profit Before Tax of N82.30bn in 2022. The company reported a tax credit of N35.16bn in 2023 compared with a Tax Expense of N27.56bn in 2023 which tempered its Net Loss to N73.76bn in 2023 compared with a Net Profit of N54.74bn in 2022.

We have DSR under review. Current Price: N59.00/s.

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