Dangote Petroleum Refinery and Petrochemicals has indicated that the unusually high crude oil price triggered by the U.S.-Iran war will not determine the profitability of its Initial Public Offering (IPO), arguing that the refinery’s returns are driven by margins rather than the cost of crude.

The Vice President of Dangote Refinery, Edwin Devakumar, disclosed this during a media interaction on Friday at the refinery in Lagos, assuring prospective shareholders of sustainable returns and dividend payments in foreign exchange.

Responding to concerns that unusually high crude oil prices driven by the U.S.-Iran war could affect the value of shares when the conflict ends and prices return to normal, Edwin said the cost of crude would not directly determine the company’s profitability.

He explained that the refinery’s profitability was primarily driven by its margins, with product prices moving alongside crude oil prices.

“Well, see, the crude price will not directly have an impact on the profitability. Because, let us say you are a trader, you are importing stationary and selling, you want to have a 20 per cent profit margin, whatever is your import price, you will add the 20 per cent and keep your profit margin. So your import price is not going to affect your profitability.

“You are focused on your margins. So, the same way, when the crude price goes up, our product price will go up. The crude price comes down, the product price will come down.” he said.

However, he acknowledged that the disruption to global refining and product supply had created additional profitability for the company, warning that the gain would not necessarily be sustained after the crisis.

Devakumar, however, said the refinery’s long-term investment projections were not dependent on the temporary market windfall, noting that the company had calculated its expected profits and returns before committing the investment.

On the proposed dividend payments, he confirmed that the refinery could pay shareholders in foreign exchange, citing its export earnings and the company’s expected expansion in production.

He said about half of the refinery’s production was already being exported, while the new refinery would allow virtually all production to be exported because domestic demand for petrol, diesel and jet fuel was not expected to rise substantially in the short term.

He nevertheless acknowledged that the long-term attractiveness of dollar dividends could be affected if the naira’s depreciation is arrested, noting that the benefit of foreign exchange payments would depend partly on the shareholder’s needs.

Addressing concerns over the sustainability of dividend payments, Edwin said investors should examine the company’s past record of profitability, dividend distribution and reinvestment.

He explained that Dangote’s business model involved allocating profits between expansion and returns to shareholders, arguing that reinvestment in new projects could also support share value.