Dangote Sugar Refinery Forging Forward On Favourable Drivers

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Dangote Sugar Refinery released its Audited reports for FY’20, which showed an impressive performance for the sugar producer as it reported its highest Revenue figure ever of ₦214.3 billion.

Although this figure was 1% less than our forecast of ₦217.3 billion, it was still a 33% improvement on the previous year’s performance.

We had mentioned in our FY’21 outlook, the increased attention to the National Sugar Master Plan (NSMP) which was established to protect local raw sugar production. In light of this, during the year, the government imposed a 20% import duty on refined sugar while also reversing an earlier 5% duty hike on the importation of raw sugar for investors in the Backward Integration Program (BIP).

Additionally, we believe that the closed borders policy implemented during the year supported expansions in volumes and price for sugar manufacturers. Thus, for Dangsugar, volumes grew 7% to 732,000 Metric Tonnes while price per Tonne averaged ₦330,000 (from ₦276,000 in billion), due to the impact of FX challenges on raw material sourcing. For context, Sugar refiners in Nigeria import c.90% of their raw sugar needs.

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This, combined with increased production volumes and the currency devaluations in the period, underlie the 35% increase in raw material expense. However, prices, supported by the limited foreign supply of refined sugar, increased to mitigate this hike.

Dangote Sugar Refinery Forging Forward On Favourable Drivers-Brand Spur Nigeria
Dangote Sugar Refinery Forging Forward On Favourable Drivers-Brand Spur Nigeria

Thus, unlike the industry trend we have observed so far, DSR’s gross margin improved c.1 ppt y/y to 25% (Vetiva: 22%). EBIT also strengthened 47% y/y to ₦45.1 billion despite a 5% increase in Opex to ₦10.1 billion. On the whole, the company reported a 33% rise in PAT to ₦29.7 billion and has proposed a dividend of ₦1.50 (FY’19:1.10).


Our outlook for DSR’s Revenue in FY’21 is based on three key assumptions: the border restrictions, traffic and logistics constraints vis-à-vis the Apapa congestion situation, and expansion initiatives of the firm.

Trade Restrictions

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While the borders have been reopened, the return of strong competition from smuggled and other imported sugar is less likely. Firstly, given the changes in the FX market that have happened in the past year, FX sourcing remains a challenge. Secondly, Sugar remains on the exclusive list under the AfCFTA. Thus, no special privileges are applied to its importation under the agreement. Furthermore, as mentioned earlier, the 20% import duty in place on refined sugar imports which will curtail the influx of imported competition. This also keeps the pricing power dynamic in favour of local producers.

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Apapa Congestion

After several attempts to alleviate the traffic situation at the Apapa port – where one of the Dangote Sugar Refineries is located, an e-call up system has been implemented. While it remains to be seen whether this system will be effective in the long run, some reports have stated that the congestion at the ports has eased considerably. With this development, we believe that the turn-around time for sales could improve significantly and positively impact volumes.

Expansion Initiatives

Lastly, we had mentioned in an earlier report that the milling capacity of the Savannah Sugar mill was undergoing an expansion and was projected to be completed by Q4’20.

However, management has updated this to an extended timeline of Q4’21 – due to the impact of the pandemic. Thus, we revise our earlier projection of increased volumes in line with this revised timeline.

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Thus, for FY’21, we adjust our projections and forecast a 6% y/y growth in Revenue (Previous expectation: +7% y/y) to ₦229 billion.

Will Margins Remain Stable?

Next, looking at costs, DSR imports raw sugar from Brazil; so in addition to FX, we look at the outlook for the country’s trade in fully determining our outlook for the company’s raw material costs in the year. Although global food outlook reports had indicated increased production expectations from Brazil this year, possible shipping challenges in the country may keep prices stable at current levels.

Thus, in line with this and considering the current performance, we expect gross margin to decline slightly to 24%. This brings our EBIT projection to ₦46.3 billion (previous estimate: ₦41.4 billion), 3% higher y/y. Based on this, we expect PAT to print at ₦30.2 billion (+1% y/y). We maintain a BUY rating on the stock with an upward revised target price of ₦21.08.

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Dangote Sugar Refinery Forging Forward On Favourable Drivers - Brand SpurDangote Sugar Refinery Forging Forward On Favourable Drivers - Brand Spur

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Dangote Sugar Refinery Forging Forward On Favourable Drivers - Brand SpurDangote Sugar Refinery Forging Forward On Favourable Drivers - Brand Spur

Latest News

Qatar Airways Launches Ferry Transfer Service from Shenzhen Shekou to Hong Kong International Airport

Qatar Airways introduces Upstream Check-in Service in Shenzhen starting from 15 April 2021 to offer greater connectivity in the Greater Bay Area

Local passengers will have the option to utilise the 30-minutes-long ferry service to fly out of Hong Kong; "Asia's World City" to over 80 destinations in Europe, the Middle East, Africa and the Americas

SHENZHEN & HONG KONG SAR, CHINA - Media OutReach - 12 April 2021 - Qatar Airways today announced the sea-to-air ferry transfer service from Shenzhen Shekou Port to the SkyPier in the airside of Hong Kong International Airport (HKIA) starting from 15 April 2021, providing passengers in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), one of the world's most dynamic mega-regions, convenient access to the airline's global network from "Asia's World City".

Dangote Sugar Refinery Forging Forward On Favourable Drivers - Brand Spur

Partnering with Airport Authority Hong Kong, the introduction of the Upstream Check-in Service will allow Qatar Airways customers in Shenzhen greater flexibility and enhanced travel options to the world from Hong Kong, where the airline operates daily direct service to Doha with its modern and fuel-efficient Airbus A350-900 aircraft that features 36 lie-flat seats in Business Class and 247 seats in Economy Class.

Qatar Airways customers can purchase their ferry tickets from SkyLink or the port's website. Passengers utilising the 30-minutes-long ferry service will be provided with boarding passes and baggage check-through service to their final destinations at the Shenzhen Shekou terminal, where they will also clear their customs and immigration. Upon arrival at SkyPier, customers can proceed directly to their Qatar Airways boarding gate, or enjoy the award-winning duty-free shopping experience and fine-dining options at HKIA before continuing a seamless and hassle-free onward journey with the airline to more than 80 destinations in Europe, the Middle East, Africa and the Americas.

Mr. Thomas Scruby, Qatar Airways Vice President of Sales for Australasia & North Asia, said: "The introduction of ferry transfer service will boost our footprint in the Greater Bay Area by providing our Southern Chinese customers more flexible flying options via HKIA. We know connectivity within the region and to the wider world is critical for the success of the GBA. Therefore, we are excited to do our part to build the infrastructure necessary to make it easier and smoother for local customers to travel despite the disruption caused by the pandemic around the world."

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"We are confident in the market's demand and our commitment to the region remains resolute. The next phase of our partnership with Airport Authority Hong Kong will see the ferry transfer service to be further expanded to other key GBA metropolis such as Macau and Dongguan once government restrictions are lifted, allowing even more customers in the region to enjoy the world-class experience that Qatar Airways has to offer."

Premium customers opting for the ferry transfer service can continue to enjoy the luxurious on-ground experience at the Plaza Premium Lounge, conveniently located near Gate 1 at the South Departures Hall in Hong Kong International Airport. Passengers will be able to take advantage of the well-furnished environment with comfortable seating, shower rooms, contactless food ordering service, highspeed Wi-Fi and international TV channels. Privilege Club Gold members and above as well as selected oneworld frequent flyers also enjoy access to The Wing located near Gates 1 - 4, the industry-renowned lounge operated by Cathay Pacific, where guests can recharge, relax, and catch up with work before boarding their Qatar Airways flights.

The Greater Bay area is home to many of the nation's leading universities and academic institutions; the ferry transfer service will also provide more travel choices to the area's students wishing to complete their higher-education or exchange programs abroad. International students will be able to enroll in Qatar Airways Student Club and enjoy a wide range of benefits throughout their educational journey, such as special fares, extra baggage allowances, the flexibility to change the dates of their flight, complimentary Super Wi-Fi onboard, and more. For information about Student Club, visit: https://www.qatarairways.com/en/student-club.html

In addition to the highest safety standards, passengers flying with Qatar Airways will enjoy an even greater range of thoughtfully designed onboard experiences, including locally inspired menus, multi-language entertainment programs within the airline's award-winning IFE system, as well as Cantonese and Mandarin-speaking staff service both onboard and at the airline's five-star hub Hamad International Airport (HIA).

Qatar Airways continues to expand its network of destinations, offering more flights to international destinations than any other airline. By the middle of summer 2021, Qatar Airways' plans to rebuild its network to more than 140 destinations including 23 in Africa, 14 in the Americas, 43 in Asia-Pacific, 43 in Europe and 19 in Middle East. Many cities will be served with a strong schedule with daily or more frequencies.

Qatar Airways has become the first global airline in the world to achieve the prestigious 5-Star COVID-19 Airline Safety Rating by international air transport rating organisation, Skytrax. This follows HIA's recent success as the first airport in the Middle East and Asia to be awarded a Skytrax 5-Star COVID-19 Airport Safety Rating. These recognitions provide assurance to passengers across the world that airline health and safety standards are subject to the highest possible standards of professional, independent scrutiny and assessment. For full details of all the measures that have been implemented onboard and in HIA, please visit qatarairways.com/safety.

A multiple award-winning airline, Qatar Airways was named 'World's Best Airline' by the 2019 World Airline Awards, managed by the international air transport rating organisation Skytrax. It was also named 'Best Airline in the Middle East', 'World's Best Business Class', and 'Best Business Class Seat', in recognition of its ground-breaking Business Class experience, Qsuite. Qsuite is available on flights to more than 45 destinations including Johannesburg, Frankfurt, New York and Singapore.

About Qatar Airways:

A multiple award-winning airline, Qatar Airways was named 'World's Best Airline' by the 2019 World Airline Awards, managed by international air transport rating organisation Skytrax. It was also named 'Best Airline in the Middle East', 'World's Best Business Class' and 'Best Business Class Seat', in recognition of its ground-breaking Business Class experience, Qsuite. Qatar Airways is the only airline to have been awarded the coveted "Skytrax Airline of the Year" title, which is recognised as the pinnacle of excellence in the airline industry, five times.

Hamad International Airport (HIA), the airline's home and hub, was recently ranked "Third Best Airport in the World", among 550 airports worldwide, by the SKYTRAX World Airport Awards 2020. Rising from fourth position in 2019 to third in 2020, HIA has been steadily rising in the 'World's Best Airports' rankings since the start of its operations in 2014. In addition, HIA was voted the 'Best Airport in the Middle East' for the sixth year in a row and 'Best Staff Service in the Middle East' for the fifth year in a row.

Qsuite, a patented Qatar Airways product, features the industry's first-ever double bed in Business Class, as well as privacy panels that stow away, allowing passengers in adjoining seats to create their own private room, a first of its kind in the industry.

Qatar Airways was the first Gulf carrier to join global airline alliance oneworld, enabling its passengers to benefit from more than 1,000 airports in more than 160 countries, with 14,250 daily departures.

Oryx One, Qatar Airways' in-flight entertainment system offers passengers up to 4,000 entertainment options from the latest blockbuster movies, TV box sets, music, games and much more. Passengers flying on Qatar Airways flights served by its B787, B777, A350, A380, A319 and select A320 and A330 aircraft can also stay in touch with their friends and family around the world by using the award-winning airline's on-board Wi-Fi and GSM service.

Qatar Airways proudly supports a range of exciting international and local initiatives dedicated to enriching the global community that it serves. Qatar Airways, the official FIFA partner, is the official sponsor of many top-level sporting events, including the FIFA World Cup Qatar 2022TM, reflecting the values of sports as a means of bringing people together, something at the core of the airline's own brand message - Going Places Together.

Qatar Airways Cargo, one of the world's leading international air cargo carriers, serves more than 60 freighter destinations worldwide via its world-class Doha hub and also delivers freight in the belly-hold of passenger aircraft to an extensive global network. The Qatar Airways Cargo fleet includes two Boeing 747-8 freighters and 24 Boeing 777 freighters.

Qatar Executive is the private jet charter division of Qatar Airways Group. Luxury jet services are available for worldwide charter on board the operator's wholly-owned business jet fleet. Qatar Executive is the launch customer for Gulfstream's G700, the world's first commercial service operator of the Gulfstream G500 and largest commercial operator of the G650ER worldwide. Qatar Executive's service portfolio also includes aircraft management, maintenance and Fixed Based Operator services.

Dangote Sugar Refinery Forging Forward On Favourable Drivers - Brand Spur
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