July 24, 2025/Cordros Report
Dangote Sugar Refinery Plc (DANGSUGAR) released their Q2-25 unaudited financials after market close on Wednesday (23 July), reporting a loss per share of NGN0.05 (vs loss per share of NGN6.18 in Q2-24), resulting in a H1-25 loss per share of NGN2.00 (vs loss per share of NGN11.86 in H1-24). The smaller loss recorded reflects the improving margins and lower FX losses (NGN58.54 million).
DANGSUGAR’s revenue grew by +25.1% y/y in Q2-25 (H1-25: +45.5% y/y), showcasing a mixed (price- and volume-led) performance, with increases seen across most product lines – 50kg Sugar (+46.7% y/y | 96.9% of revenue), Retail sugar (+16.6% y/y | 2.3% of revenue) and Molasses (+28.4% y/y | 0.8% of revenue) – save for Freight income (0.0% of revenue), which declined sharply by 85.1% y/y. Revenue growth across the group’s business regions was led by the North (+84.1% y/y | 37.6% of total revenue), followed by Lagos (+9.5% y/y | 54.3%). Meanwhile, revenue from Western (-20.0% y/y | 5.8%), and Eastern (-15.0% y/y | 2.3%) regions lagged.
Remarkably, DANGSUGAR recorded a rebound in their operating margins, with gross and EBITDA margins surging by 14.18ppts y/y and 14.71ppts y/y in Q2-25 to 19.6% and 19.5% (Q2-24: 5.4% and 4.8%), respectively. Accordingly, H1-25 gross and EBITDA margins improved to settle at 12.0% a-piece (vs 6.1% and 5.6% in H1-24), respectively. This reflects softer cost pressures in Q2-25, with the cost of sales increasing at a much softer pace by 6.3% y/y (Q1-25: +79.6% y/y) owing to the mild (but significant) decline in cost of raw materials, which fell by -0.8% y/y (Q1-25: +81.8% y/y). The softer pace reflects the stable currency and lower inflation rate.
Additionally, the stable FX environment dampened DANGSUGAR’s FX-related losses, with the company recording exchange losses of NGN59.00 million (vs NGN90.70 billion in Q2-24). Accordingly, finance costs eased by 68.6% y/y to NGN34.65 billion from NGN109.31 billion in Q2-24. Nonetheless, we identify the company’s high interest expense for the period H1-25 as a downside risk to earnings. For context, DANGSUGAR recorded an accrued interest payment on bank loans of NGN17.75 billion, compared to NGN40.25 million in H1-24.
Ultimately, owing to the strong topline performance, DANGSUGAR posted a pre-tax profit of NGN523.89 million in Q2-25 (compared to a pre-tax loss of NGN104.56 billion in Q2-24), thereby shrinking the H1-25 pre-tax loss to NGN22.11 billion (compared to NGN211.42 billion in H1-24). Following a 219.5% effective tax rate (Q2-24: 35.4%), the loss after tax settled at NGN626.11 million (vs loss after tax of NGN75.01 billion in Q2-24).
Comment: We believe the stable FX environment played the most crucial role in DANGSUGAR’s performance in Q2-25. Nonetheless, we are impressed with the company’s ability to manage costs effectively, with a focus on reducing the cost-to-sales ratio (H1-25: 88.0% vs H1-24: 93.9%). Factoring in the improving macro landscape, we believe DANGSUGAR is on track to turn things around by FY-25, featuring margin recovery. We note that any resumption of FX instability poses the biggest threat to maintaining current performance. Our estimates are under review.
