Exchange Loss Pushes Dangote Sugar Refinery’s Net Loss To N41bn In Q3

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Dangote Sugar Refinery Plc experienced further swelling of foreign exchange loss from N83 billion at the half year to N91 billion at the end of the third quarter. That has jerked up the pre-tax loss from N31.4 billion at the end of June to over N41 billion at the end of nine months of operations.

The company’s unaudited financial report for the third quarter ended September 2023 shows a sudden downswing for the sugar-producing company from last year when it recorded over a 144 percent leap in after-tax profit to close at nearly N55 billion.

The foreign exchange loss figure at the end of nine months of trading represents a more than six times increase over the corresponding figure of N14.3 billion in 2022. That is however a considerable slowdown from a jump of 17 times in foreign exchange loss at the half year.

The increasing cost of production in the third quarter added additional pressure to the foreign exchange loss – which constrained operating results.

Cost of production grew by more than N16 billion or 19.2 percent in the third quarter to N100.5 billion compared to an increase of N4 billion or less than 4 percent in sales revenue for the quarter to less than N107 billion.

Cost of production therefore consumed more than four times the increase in sales revenue for the third quarter, which slashed gross profit by over N12 billion to N6.5 billion.

A huge increase in other operating income from N61.6 million to N866.6 million and a decline of 17.5 percent in selling and distribution expenses in the quarter were positive developments during the period but quite insufficient to moderate the increase in production costs.

Operating profit, therefore, dropped by N11.8 billion or 75 percent to N3.9 billion in the third quarter.

The biggest pressure then came from net finance expenses, which was induced by foreign exchange losses jumping from less than N10 billion in the same quarter last year to N15.7 billion for the third quarter.

While finance income grew from N1.7 billion to N2.3 billion in the quarter, finance costs, led by foreign exchange losses, rose from N11.7 billion to over N18 billion – an increase of 53.8 percent. This is however a major slowdown from a 12 times upsurge in finance costs to N90.7 billion in half a year.

The resulting cost-income imbalance created a pre-tax loss of roughly N10 billion in the third quarter. The loss for the quarter was however absorbed by a tax credit of N10.9 billion, which left an after-tax profit of N960 million.

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The moderate profit for the third quarter only scratched the company’s net loss figure of about N28 billion in the half year, lowering it to N27 billion at the end of the third quarter.

The company’s nine-month earnings position reflects the increased pressure in operating activities in the third quarter and the slowdown in foreign exchange losses in the quarter as well.

Sales revenue slowed down from an increase of over 9 percent at the half year to 7.4 percent to N309.7 billion at the end of the third quarter due to weakness recorded in the third quarter. On the other hand, production costs grew by more than 6 percent, reversing from a marginal decline of 1.4 percent at the half year.

The outcome is an increase of 12.6 percent in gross profit to N64.7 billion at the end of the third quarter, significantly down from an increase of 50 percent at the half year.

The company gained some strength from outstanding growth in other income from N363 million to over N1 billion over the period as well as a drop of 17.6 per cent in selling and distribution costs of N459.6 billion.

The gains were however claimed by administrative expenses that grew by 23.8 per cent to over N9 billion at the end of September 2023.

Operating activities therefore resulted in an operating profit of a little over N56 billion for the nine months of operations, which is an increase of 12.6 percent – marking a considerable slowdown from an increase of 53 percent at half year.

An increase of 96.7 percent in finance income to over N7 billion was supported by a 137 percent increase in fair value adjustment to N4 billion.

However, the gains were consumed by the high rise in finance costs, which built a net finance cost of N101.5 billion – an increase of more than six and half times year-on-year.

The company’s operating profit was therefore erased and a pre-tax loss of over N41 billion was created, an increase from N31.4 billion loss in half the year.

A tax credit of over N14 billion reduced the net loss position to N27 billion at the end of third quarter operations. Yet the loss figure is a deep plunge from the after-tax profit of N24.8 billion the company reported for the same period in 2022.

Dangote Sugar Refinery lost N2.2 per share at the end of the third quarter operations against earnings per share of N2.04 in the same period in 2022.