FSDH Initial Reaction: Dangote Sugar FY22 results 
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March 3, 2023/FSDH Research

Key Performance Highlights:

• On 2 March 2023, Dangote Sugar reported a solid set of numbers for FY22. The company’s revenue soared 46.1% YoY to N403.2 billion in FY22 from N276.1 billion in FY21, primarily driven by the 45.3% YoY rise in the 50kg Sugar revenue segment to N391.0 billion in FY22. On the contrary, the company’s cost sales grew 37.8% YoY to N311.3 billion in FY22. The cost of sales mainly increased due to the rise in the raw material costs to N256.3 billion in FY22 from N183.4 billion in FY21. The robust revenue growth coupled with a less than proportionate increase in the cost of sales resulted in 462 bps YoY gross margin expansion to 22.8% in FY22, from 18.1% in FY21.
   
• Other income vaulted 330.9% YoY to N1.4 billion in FY22 versus N0.3 billion in FY21. It’s worth noting that the company managed its operating costs effectively in FY22 as the selling and distribution costs declined 18.2% YoY to N741 million compared to N906 million in FY21. Administrative expenses also declined 3.0% YoY to N10.3 billion in FY22 versus N10.6 billion in FY21 due to a 45.8% YoY drop in donations and management fees. Consequently, the company’s operating profit spurted 111.2% YoY to N82.4 billion in FY22 versus N39.0 billion in FY21.
   
• Furthermore, the finance income grew 4.5x YoY to N6.47 billion due to higher interest income on bank deposits at an average rate of 5.9% in FY22 versus 3.5% in FY21. The finance costs vaulted 47.9% YoY to N9.8 billion, primarily due to an increased cost on the letter of credit. Additionally, the company reported a fair value gain on biological assets of N3.3 billion in FY22, a 15.6x YoY jump. The company recorded an effective tax rate of 33.5% in FY22 versus 35.2% in FY21. Despite bearing tax expenses of N27.6 billion in FY22 (FY21: N12.0 billion), Dangote Sugar reported a net profit of N54.7 billion in FY22, a massive 148.2% YoY growth. Earnings per share ascended to N4.51/share in FY22 compared to N1.82/share in FY21. The board has proposed a final dividend of N1.50 per share subject to appropriate withholding tax and the board member’s approval to the shareholders on the Register of Members at the qualification date.
   
• For FY22, revenues from all segments reported solid growth. Sugar-50 kg (97.0% of FY22 revenue) revenue spurted 45.3% YoY, supported by a 65.9% YoY jump in Sugar-Retail (2.0% of FY22 revenue). The molasses segment (0.5% of FY22 revenues) soared 80.4% YoY to N2.1 billion, and the Freight income (0.5% of FY22 revenues) rose 111.6% YoY to N2.2 billion in FY22. Regarding geographical revenue distribution, revenue growth from the North was 58.0% YoY, generating N178.8 billion in revenues. Lagos sales generated N173.0 billion, 36.7% growth YoY. While revenue from the West and East was N34.6 billion and N16.8 billion, respectively, both reporting a 36.7% and 52.9% YoY increase.
   
• The company’s margins expanded across the board in FY22 due to robust sales growth and effective cost controls. The operating margin experienced the maximum expansion of 630 bps YoY to 20.4% in FY22. The company’s net margin grew 559 bps YoY to 13.6%, and the EBITDA margin expanded 536 bps YoY to 22.9% in FY22.

Market Reaction: The investor reaction to the blockbuster FY22 results was buoyant as the Dangote Sugar stock popped 9.94% to N19.35, versus a 0.29% gain for the All-Share Index (2/3).

Dangote Sugar Earnings Highlights FY22

Source: Company Financials, FSDH