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Dangote Sugar faces margin pressures as input costs climb: analysts

By David Whitehouse
Posted on Friday, 19 November 2021 11:26

Sugar cane transported at the Sao Martinho sugar mill in Pradopolis, Brazil. The country is a major supplier of raw sugar to Nigeria. REUTERS/Paulo Whitaker

Pressure on profitability at Dangote Sugar Refinery (DSR), Nigeria’s largest sugar refiner, is likely to intensify as cost prices for sugar may keep rising, analysts say.

Rising input costs have “completely undone what would have been a stellar year” for DSR this year, according to research from Chapel Hill Denham in Lagos. Annualised earnings for the first nine months of 1.70 naira per share lagged behind the Chapel Hill Denham estimate of 1.95 and the market expectation of 1.81.

That was mostly due to costs, with the cost of goods sold rising by 26% in the third quarter versus a year earlier.

Dangote Sugar Refinery CEO Ravindra Singhvi said at the end of October that he was “hopeful” that “despite the prevalent challenges in the environment our current performance will be sustained” to the end of the year.