May 2, 2025/Cordros Report
Dangote Sugar Refinery Plc (DANGSUGAR) released their Q1-25 unaudited financials after market close on Wednesday (30 April), reporting a loss per share of NGN1.95 (vs loss per share of NGN5.68 in Q1-24). The narrower loss reflects some moderation in FX-related pressures, though still weighed heavily by elevated cost pressures from cost of sales (+79.6% y/y) and OPEX (+82.0% y/y).
DANGSUGAR’s revenue grew by 74.3% y/y in Q1-25, driven by increases in all their product lines – 50kg Sugar (+77.4% y/y | 97.0% of revenue), Retail sugar (+10.8% y/y | 3.4% of revenue) and Molasses (+24.5% y/y | 0.8% of revenue). Freight income, however, declined sharply (-89.5% y/y | 0.1% of revenue). Revenue growth across the group’s business regions was led by the North (+114.9% y/y | 38.4% of total revenue), followed by Lagos (+51.8% y/y | 51.8%), Western (+91.8% y/y | 7.5%), and Eastern (+57.1% y/y | 2.4%) regions. Sequentially, revenue grew by 18.0% q/q. We believe price increases supported revenue performance during this period.
Gross margin remained under pressure in the quarter, declining by 280bps y/y to 4.3% (Q1-24: 7.1%), primarily due to heightened cost pressures, as the cost of sales surged by 79.6% y/y. This increase was mainly attributable to higher cost of materials, which rose by 81.8% y/y (accounting for 86.5% of total cost of sales), alongside a 58.5% y/y increase in direct overheads (7.3% contribution). As a result, profitability remained challenged, with EBITDA and EBIT margins contracting by 217bps y/y and 303bps y/y, to 4.4% and 1.3%, respectively, amid an 80.2% y/y jump in operating expenses.
On a positive note, net finance costs dropped by 77.2% y/y to NGN27.46 billion, benefiting from a net FX gain of NGN101.68 million (vs. a loss of NGN102.98 billion in Q1-24).
Overall, DANGSUGAR recorded a reduced pre-tax loss of NGN22.63 billion in Q1-25 (Q1-24: NGN106.80 billion), while the post-tax loss stood at NGN23.65 billion (vs. NGN68.99 billion in Q1-24), reflecting a NGN1.02 billion tax expense in the quarter, compared to a tax credit of NGN37.86 billion in Q1-24.
Comment: While DANGSUGAR grew revenue impressively and reduced their FX burden, the persistently high production and operating costs continued to pressure margins and profitability. However, while the improvement in net loss is encouraging, we believe that persistent cost pressures — particularly from elevated raw material prices and operating expenses — will remain a key constraint to margin recovery and overall earnings performance in the near term. Our estimates are under review.
