Dangote Sugar Refinery Sees Sales Surge Despite FX Challenges

Dangote Sugar Refinery has posted strong operational gains, only to see its profits erode due to significant foreign exchange losses in the second quarter of 2023. 

This comes as a staggering loss of nearly N50 billion in pre-tax earnings was recorded in Q2, primarily due to a foreign exchange setback of over N83 billion. 

The loss was particularly surprising given the company’s excellent performance in recent years.

The Impact of Reduced Expenses

The company enjoyed robust sales growth, with revenue increasing by 10.5% in Q2 to N100.6 billion. Operational efficiency was also evident as production costs dipped by about 5% to N68.1 billion, boosting the gross profit by 67.6% to N32.4 billion. 

This impressive growth was partly due to a decline in selling, distribution, and administrative expenses.

Even though Dangote Sugar achieved a record 71.4% increase in operating profit to N29.3 billion for the quarter, this success was nullified by the enormous foreign exchange losses. 

Forex Losses Nullify Operational Gains

The company’s half-year figures highlight both its stellar operational performance and the crippling effects of the forex loss, which resulted in a net loss of about N28 billion at the end of the first half.

Finance income for the period doubled to N2.2 billion, adding another positive note to the company’s operational milestones. 

However, this was overshadowed by a net finance cost of N85.8 billion that eliminated all the operational profits and resulted in a pre-tax loss of N31.4 billion for the half-year.

Compared with Previous Years

In the previous year, Dangote Sugar had posted a remarkable 144.4% increase in after-tax profits, reaching N54.7 billion. 

The first quarter of 2023 also looked promising with a 44.3% advance in profits to N12.8 billion. But the unexpected forex loss in Q2 this year, 17 times greater than the same period in 2022, has abruptly halted this momentum.

Looking at the company’s finances for the first half of 2023, total revenue grew by 9.3% year-on-year to N202.8 billion. 

The favourable combination of sales revenue and reduced input costs, which declined marginally by 1.4% to N144.6 billion, led to a 50% growth in gross profit, closing at N58.2 billion for the half-year.

The result of all these operational activities is a half-year operating profit of N52.2 billion, an increase of 53% year-on-year. 

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