Dangote Sugar Refinery Plc (DANGSUGAR), one of Nigeria’s leading sugar producers, reported a disappointing financial performance in the second quarter of 2023, attributing the loss to the significant impact of the foreign exchange (FX) liberalization policy implemented in June. The company released its unaudited financials for Q2-23 yesterday, revealing a standalone loss per share of NGN3.36, a sharp contrast to the earnings per share (EPS) of NGN0.94 recorded in Q2-22. This resulted in a loss per share of NGN2.30 for the first half of 2023 (H1-23), compared to an EPS of NGN1.67 in the corresponding period of the previous year.
DANGSUGAR’s revenue managed to increase by 10.5% year-on-year in Q2-23, supported by growth across its 50kg Sugar, Retail sugar, and Molasses business segments. However, freight income experienced a significant decline of 50.5% year-on-year. Revenue from Lagos, West, and East regions compensated for the lag in the Northern region. Nevertheless, on a quarter-on-quarter basis, revenue declined by 1.6% due to lower 50kg Sugar sales in the quarter.
Despite the increase in revenue, DANGSUGAR’s profitability was impacted by higher net finance costs, growing 30.2 times the value in the prior quarter. The surge in finance costs was a result of the effects of the higher exchange rate losses following the currency devaluation in June. The company had to reprice its assets and liabilities to reflect the higher FX rates, leading to a substantial FX loss balance. On a brighter note, finance income saw a growth of 99.3% year-on-year.
As a result, DANGSUGAR recorded a pre-tax loss of NGN49.90 billion in Q2-23, a significant drop from the pre-tax profit of NGN16.13 billion in Q2-22. After accounting for a tax credit of NGN9.11 billion, the company reported a loss after tax of NGN40.79 billion in Q2-23, compared to a profit after tax of NGN11.37 billion in Q2-22.
The company’s management commented on the challenging situation, stating that the effects of the FX liberalization policy would continue to put pressure on DANGSUGAR’s performance in the second half of the year. They acknowledged the sizable gap between the current FX rates and those of the prior period, indicating that the company’s estimates for the remainder of the year are currently under review.
As with many other non-financial companies operating in Nigeria, DANGSUGAR faces headwinds caused by the FX fluctuations, which have impacted its profitability and financial performance. The company remains cautious about the uncertain FX environment and its potential ramifications on its business operations moving forward. Investors and stakeholders are keenly observing the company’s actions and measures to mitigate the challenges posed by the FX situation and its strategies to ensure sustainable growth in the midst of the ongoing economic uncertainties.