NIGERIA – Dangote Sugar Refineries has reported margin expansion amidst slowed sales impacting on revenue, which declined 30.9% to US$113.84 million due to lower prices in the first quarter.

The Vanguard reported that although the company recorded 10.9% increase in after tax earnings to US$14.68 million, these were way too below the estimates by analysts forecast at US$18.83 million.

In a bid to offset the impact of inflationary pressures and higher input costs, the company product prices were raised by about 43.5% on average in 2017 against 2016 levels.

Gross margin improved by 25% attributable to decline in overall material costs during the quarter, supported by lower raw sugar prices and the easing of the foreign exchange (FX) constraints that prevailed in the corresponding quarter of 2017.

The quarter results were weighed down by higher operating expenses, increase in selling and distribution expenses offset by lower production costs that saw operating profit margin improve to 20.5%.

A 10.9% increase in profits after taxes to US$14.68 was boosted by FX revaluation gains of about US$10.8 million plus lower input costs challenged by increasing operating expenses.

According to analysts at Cordros Capital Limited, a Lagos based investment, the impact of volume outturn on revenue could have been affected by notably the activities of smugglers and the poor condition of the factory road.

“The volume outturn raises concern for 2018 revenue as a whole, given that the January-March quarter (and indeed, the first half) is seasonally strong for Dangote Sugar,” said the analysts.

Given a US$36.17 per tonne average selling price computed by the company, Cordros lowered its 2018E volume growth forecast from 9.5% to 5% with increased possibilities of the price reducing as a result of poor volume outturn in the first quarter.

They however forecast an increased margin supported by factors such as better energy mix, stable and stronger exchange rate, stable outlook of global raw sugar prices and positive mix from growing contribution of higher margin Savannah.