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DANGOTE SUGAR REFINERY PLC FY;20 - Forging forward on favourable drivers

Dangote Sugar Refinery released its Audited reports for FY’20, which showed an impressive performance for the sugar producer as it reported its highest Revenue figure ever of ₦214.3 billion. Although this figure was 1% less than our forecast of ₦217.3 billion, it was still a 33% improvement on the previous year’s performance. Dangote Sugar Refinery released its Audited reports for FY’20, which showed an impressive performance for the sugar producer as it reported its highest Revenue figure ever of ₦214.3 billion. Although this figure was 1% less than our forecast of ₦217.3 billion, it was still a 33% improvement on the previous year’s performance. We had mentioned in our FY’21 outlook, the increased attention to the National Sugar Master Plan (NSMP) which was established to protect local raw sugar production. In light of this, during the year, the government imposed a 20% import duty on refined sugar while also reversing an earlier 5% duty hike on importation of raw sugar for investors in the Backward Integration Program (BIP). Additionally, we believe that the closed borders policy implemented during the year supported expansions in volumes and price for sugar manufacturers. Thus, for Dangsugar, volumes grew 7% to 732,000 Metric Tonnes while price per Tonne averaged ₦330,000 (from ₦276,000 in 2019)."

Trade restrictions

While the borders have been reopened, the return of strong competition from smuggled and other imported sugar is less likely. Firstly, given the changes in the FX market that have happened in the past year, FX sourcing remains a challenge. Secondly, Sugar remains on the exclusive list under the AfCFTA. Thus, no special privileges are applied to its importation under the agreement. Furthermore, as mentioned earlier, the 20% import duty in place on refined sugar imports which will curtail the influx of imported competition. This also keeps the pricing power dynamic in favour of local producers."