Dangote Sugar on Monday revealed it increased prices in the first quarter of 2021 to mitigate the problems of rising inflation and depreciation.
In a note to investors, the company revealed its recent 41.5% surge in revenues was due to an increase in sales volume as well as an uptick in price. In the first quarter of 2021, Dangote Sugar posted a revenue of N67.39 billion compared to N47.6 billion, the same period in 2020. The increase in price was driven by 5.7% pop in sales volume as the company sold 200,510 tonnes of sugar in the quarter compared to 189, 724 the same period in 2020.
But while sales value surged by 41.5%, volumes only rose 5.7% suggesting that price increase was a catalyst for the growth in revenue and the company alluded to this in its statement.
“Group sales volume increased in the quarter by 5.7% to 200,510 tonnes (2020: 189,724 tonnes). Growth continued to benefit from the sustained efforts to drive customer base expansion, several trade initiatives and investments. Group production volume also increased by 4.3% to 200,783 tonnes (2020: 192,584 tonnes) due to our operations optimization strategy despite the challenges of the Apapa traffic situation.
Group revenue increased by 41.5% to N67.39 billion (2020: N47.64 billion). Growth in revenue advanced ahead of volume growth due to pricing benefits. Gross profit increased by 41.8% to N18.04 billion (2020: N12.72 billion) on account of better topline performance. EBITDA increased by 34.7% to N17.02 billion (2020: N12.64 billion) on account of increased earnings. Group profit after taxation for the period increased by 30.3% to N8.30 billion (2020: N6.37 billion) reflecting management’s unrelenting drive to deliver consistent shareholder value.”
The company also explained it had no choice but to increase prices because of the impact of the 2020 devaluation, higher inflationary environment, port congestion issues and a rise in global sugar prices. The company imports raw sugar from Brazil, under the government’s backward integration plan.
“We have continued to witness high cost of raw materials, energy costs and other input costs due to rising inflation and FX rate fluctuation. Further cost escalation is anticipated in the year as inflationary pressure mounts,” the company said.