August 20, 2024/InvestmentOne Report
In the first half of 2024, the company experienced a significant increase in revenue, reaching NGN295.62bn, up 45.78% driven by income growth from multiple business segments. As such, the 50kg sugar segment increased by 46.30% year-over-year, retail sugar rose by 46.70% year-over-year, and molasses saw a remarkable 66.20% year-over-year growth. However, the cost of sales also saw a dramatic rise of 91.91%, climbing to NGN277.49bn from NGN144.60bn due to increased inflationary pressure from material and overhead costs.
This resulted in a substantial decrease in gross profit by 68.83%, down to NGN18.14bn from NGN58.19bn. Other income rose by 48.86%, while selling and distribution expenses saw a modest increase of 2.23%. dministrative expenses increased notably by 32.92%. Despite gains in impairment of financial
assets, operating profit fell sharply by 80.22%, dropping from NGN52.20bn to NGN10.33bn.
Finance Cost Stifles Bottomline Growth: Finance income slightly decreased by 12.49% to NGN4.24bn, while finance costs surged by 158.32% to NGN243.19bn, leading to a significant increase in net finance costs by 167.97%. The fair value adjustment provided a positive impact, increasing by 264.89% to NGN8.20bn, but the overall profit before tax still suffered a severe decline, turning to a loss of NGN211.42bn from a loss of NGN31.37bn in 2023.
Taxation credit saw a remarkable increase to NGN67.41bn, resulting in a softer net loss of NGN144.01] bn for the year, compared to a loss of NGN28 bn in the previous year.
Sequential Performance: In the second quarter of 2024, revenue increased by 40.88% to NGN172.90bn from NGN122.73bn in the first quarter. The cost of sales also rose by 43.46%, leading to a modest increase in gross profit by 7.28%, reaching NGN9.39bn. Other income increased significantly by 210.95% to NGN163.20mn, while selling and distribution expenses grew by 5.22% to NGN159.10mn. Administrative expenses saw a 21.36% increase NGN4.25bn. The company recorded a loss in impairment of financial assets, contributing to a 4.99% decrease in operating profit, which stood at NGN5.03bn.
Finance income improved by 24.16%, while finance costs decreased by 8.86%, resulting in a 9.38% decrease in net finance costs. The fair value adjustment turned negative, impacting the profit before tax, which slightly improved by 2.15% but remained a loss of NGN104.6 bn. Taxation decreased by 21.97%, yet the company reported a larger net loss for the quarter, increasing by 8.73% to NGN75.01bn.
Balance Sheet: On the balance sheet, total assets increased by 26.26% to NGN714.7 bn. Non-
current assets rose significantly by 71.03% due to the increase in the deferred tax assets by NGN102.51bn, and current assets increased by 8.26%. Total liabilities saw a sharp increase of 76.74% to NGN779.4 bn, with current liabilities rising by 75.72%.
Current liabilities took to an upward trajectory due to the commercial paper which was raised to bolster up working capital amounting to NGN141.34bn and short-term bank overdraft facilities amounting to NGN25.36bn. Non-current liabilities changed from a negative balance to a positive one, indicating adjustments or reclassifications.
Equity suffered a drastic decline, turning negative at NGN64.7 bn from a positive NGN125 bn in
2023, largely due to a significant decrease in retained earnings by 168.46% due to the increased
rate of losses recorded.
Outlook: Going forward, we expect the revenue to remain upbeat while the company tries to employ cost cutting strategies and try to expand further on their Backward Integration Program
(BIP). Notably a significant portion of her foreign exchange debts remain unrealized thereby leaving a chance of recovery if the exchange rate stabilizes at a stable rate. The increase in BIP efforts is expected to yield fruits if the organization is able to adequately scale and reduce need for foreign exchange to import their sugar needs.
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