By Niyi Jacobs
Dangote Sugar Refinery’s stock has witnessed a remarkable journey, with a 255% year-to-date gain in 2023 and a five-year high of N82.65 on January 29, 2024. However, the release of its 2023 audited results and Q1 2024 financial results has led to a bearish trend, with a YtD loss of 25.55% as of June 25, 2024.
The company attributed its pre-tax loss of N108.9 billion in 2023 to a significant net foreign exchange loss of N172 billion, representing an over 9,000% YoY increase. This foreign exchange loss continued to worsen in Q1 2024, reaching N102.97 billion, resulting in a pre-tax loss of N107 billion.
Aside from the foreign exchange impact, the company’s cost of sales has been increasing, surging to N355.14 billion in 2023 and N114 billion in Q1 2024, leading to a gross profit decline of 6.15% and 66% respectively. The significant decline in gross profit and gross margin suggests higher expenses related to production or acquisition of goods, posing challenges to maintaining profitability.
The negative earnings per share of -N12.8 on a trailing twelve-month basis reflects the company’s insufficient net income to cover its outstanding shares. While the price-to-book ratio stands at 99.74, indicating a high valuation, the price-to-sales ratio of 1.12x suggests a more moderate valuation.
Despite the challenges, Dangote Sugar’s backward integration strategy aims to produce 1.5 million tons of refined sugar annually from locally grown sugarcane within the next ten years. Ensuring profitability and restoring investor confidence through strategic initiatives will be essential for the company’s future success.
Investors should exercise caution, considering the company’s current unprofitability and inability to pay dividends last year. A return to profitability and sustainable growth is crucial for Dangote Sugar to remain a sweet deal for investors.
