Dangote Group’s listed firms incur N400b FX losses in six months

Dangote Group’s three listed companies including Dangote Sugar Refinery, National Salt Company of Nigeria (NASCON) and Dangote Cement incurred combined foreign exchange (FX) losses of close to N400 billion in half-year (HI) operations.

The FX losses were based on the devaluation of the Naira to N1,500. These companies also suffered FX losses at the end of 2023 operations when Naira was devalued to N913.

Checks showed that quoted companies under the manufacturing and Fast-Moving Consumer Goods (FMCG) sector have continued to suffer foreign exchange crises since the beginning of the 2023 financial year, which has wiped out their shareholders’ funds and put them in a severe loss position.

Operators said firms that have FX loan obligations on their statement of financial position will continue to suffer from any depreciation of the Naira until the loans are fully repaid.

According to them, those who require imported raw materials to aid their production will also report higher costs of sale as a result of the Naira depreciation.

Head of Research, FSL Securities, Victor Chiazor, said although this can easily be transferred to the final consumer room support revenues, the reality remains that for any company exposed to either FX loans or imports, a weak Naira will continually impact their bottom line and possibly threaten the company’s existence if the losses are extended for too long.

To manage this, he said companies should engage in a hedging contract around their FX exposures to moderate losses around such borrowing or purchases until the fiscal and monetary authorities can get a lasting solution to the FX situation.

Head of Equity, Planet Capital, Dr Paul Uzum, urged listed firms to avoid foreign currency loans when operating in a country fraught with economic instability like Nigeria.

“If your loans are in Naira, you do not have a problem, but when you borrow in USD to do business, you are taking a big risk.”

Aside from unstable interest rates, parlous infrastructure, high energy costs, multiple taxation and activities of various agencies the terminals have continued to impact the performance of these firms, impacting negatively on their operating cost.

An independent investor, Amaechi Egbo urged the government to adopt a deliberate approach to tackling the FX issue in Nigeria to forestall further profit losses and dividend cuts.

A breakdown of the figures showed that Dangote Sugar incurred FX losses of about N193.7 billion in the first half of 2024, representing an increase of 133 per cent when compared to N83.1 billion suffered in the corresponding period in 2023.

The company posted accrued revenue of N295.6 billion, reflecting a 46 per cent higher than N202.8 billion revenue recorded in H1 2023.

However, it posted a pre-tax loss of N104.6 billion in the second quarter, compared to the N49.9 billion pre-tax loss posted in 2023.

The company closed yesterday’s trading at N37.30 kobo from N57 at which it reopened for transactions in January 2024, depreciating by 34. 6 per cent.

Analysts at Cordros Capital said the company’s profitability was negatively impacted by naira depreciation and high inflation, similar to other non-financial companies in Nigeria.

“While we anticipate continued revenue growth from price increases and improved trade volumes, high import prices for raw materials and elevated operating expenses are likely to persist over H2, 24. Consequently, we still anticipate negative earnings in 2024E, driven by FX losses and high input and operating costs.”

NASCON Allied Industries incurred a foreign exchange loss of N1.97 billion for the six months ended June 30, 2024.

Although the company’s revenue rose by 32 percent to N50.4 billion within the period, the N1.97 billion FX loss depressed its profitability within the period. For instance, its Profit before tax (PBT) decreased by 16 percent to N7.2 billion while Profit after tax (PAT) dipped by 16 percent to N4.8 billion. Its earnings per share also declined by 18 percent at N3.59.

The company’s Managing Director, Thabo Mabe said Nascon achieved a remarkable 32 percent revenue growth of N50.4 billion despite navigating a challenging business environment in Nigeria.

However, he added that the currency devalued further resulting in an extraordinary foreign exchange loss of N1.97 billion which depressed PAT to N4.8 billion, a 16 per cent decline from the previous year due to the macroeconomic conditions.

Dangote Cement posted an FX loss of N201.30 billion from N113.63 billion in H1 2023. The company recorded 85 percent rise in revenue to N1.76 trillion in the first half of 2024 from N950 billion in the same period of last year.

Its profit also rose by 6.2 per cent to N189 billion, higher than N178 billion in the same period last year.

However, the cement manufacturer giant suffered a net foreign exchange loss that rose to N201.3 billion in the first half of 2024 from N113.63 billion in the corresponding period in 2023.