nigeriaDangote Sugar Refinery Plc (DSR)

Company Profile and History

Dangote Sugar Refinery Plc commenced business in March 2000 as the sugar division of Dangote Industries Limited. The sugar refining factory at Apapa port was commissioned in 2001 with an initial installed capacity to process 600,000 MT of raw sugar per annum. In December 2007, DSR Plc successfully exported its first consignment of 1,500MT of sugar to Ghana.

Dangote Sugar Refinery Plc is listed on the Nigerian Stock Exchange (NSE). The company’s shares were listed on the NSE on March 8, 2007 at N18/share following the divestment of 25 per cent holdings of The Dangote Group (Dangote Industries Limited) via an initial public offering (IPO) of 10 billion shares in November/December 2007.

The company’s installed capacity is close to 1.44million metric tons p.a with about 75 per cent current capacity utilisation.

DSR Plc was awarded the Best African Initial Public Offer for 2007 by Africa Investors’ Index series; in November 2007, DSR Plc won the Nigerian Stock Exchange’s President Merit Award for best quoted company in the Food and Beverage sector; the Standards Organization of Nigeria awarded the Company the NIS ISO 9001:2000 International Quality Management Award; it won the 2008 Nigerian Stock Exchange's President's Merit Award for Best Quoted Company of the Year in the Food and Beverages Sector; and the 2009 International Quality Award in the Gold Category, by renowned Business Initiative Directions- Madrid Spain.

In Country Location

Modandola House, 42 44 Warehouse Road, Apapa, Lagos, Fax: 234 1 271 4466

Services and Products

Dangote Sugar Refinery Plc engages in refining and marketing sugar. The company imports raw sugar from Brazil, refines it into Vitamin A-fortified white sugar, and sells the finished product under the brand name ‘Dangote Sugar’ across Nigeria. The company has two categories of customers - Super industrial users who are largely blue chip Nigerian companies, which account for about 18 per cent of its sales revenue. These include Nestle Nigeria Plc, Cadbury Nigeria Plc, Seven-Up Bottling Company Plc and Nigerian Bottling Company Plc (NBC). The other group is the distributors who service the retail end of the market (i.e. household and micro industrial users). This group trades in wholesale white sugar and responsible for nearly 82 per cent of Dangote Sugar’s sales revenue.

Number of Employees

694 Employees

Financial Information

Currency in Millions of Nigerian Nairas Jan 2005 Jan 2006 Jan 2007 Restated Jan 2008
Revenues 36,576.2 58,494.7 83,767.9 80,649.4
TOTAL REVENUES 36,576.2 58,494.7 83,767.9 80,649.4
Cost of Goods Sold 25,803.5 44,458.6 63,623.6 48,184.1
GROSS PROFIT 10,772.6 14,036.1 20,144.3 32,465.3
Selling General & Admin Expenses, Total 2,167.5 2,433.4 3,091.4 3,207.5
Other Operating Expenses -- -- -149.8 -174.4
OTHER OPERATING EXPENSES, TOTAL 2,167.5 2,433.4 2,941.5 3,033.1
OPERATING INCOME 8,605.1 11,602.7 17,202.8 29,432.2
Interest Expense -1,290.0 -2,223.4 -894.7 -2.1
Interest and Investment Income -- -- 349.0 1,196.5
NET INTEREST EXPENSE -1,290.0 -2,223.4 -545.7 1,194.5
Other Non-Operating Income (Expenses) 56.0 0.3 -- --
EBT, EXCLUDING UNUSUAL ITEMS 7,371.1 9,379.7 16,657.1 30,626.6
Other Unusual Items, Total -- -- -- 34.1
Insurance Settlements -- -- -- 34.1
EBT, INCLUDING UNUSUAL ITEMS 7,371.1 9,379.7 16,657.1 30,660.7
Income Tax Expense -- -- -- 9,182.2
Earnings from Continuing Operations 7,371.1 9,379.7 16,657.1 21,478.6
NET INCOME 7,371.1 9,379.7 16,657.1 21,478.6
NET INCOME TO COMMON INCLUDING EXTRA ITEMS 7,371.1 9,379.7 16,657.1 21,478.6
NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 7,371.1 9,379.7 16,657.1 21,478.6

Market Share

DSR is the largest sugar refinery in sub Saharan Africa and second largest in the world, after the 1.75 million MT per annum Al Khaleel. It has a consumer market share of about 80% in the Nigerian sugar market.

Business Objective

“To become a global, integrated, low cost sugar producer focused on maximising long-term shareholder returns while establishing a leading presence in domestic and regional African markets”

Business Model

Dangote Sugar exploits its distinctive strategic competitive advantage in the local and international markets as one of the sugar refiners in the world that produces Vitamin A fortified white sugar not only to sustain and grow its share of local market but also to capture the near markets in African sub-Sahara region.

DSR’s strategic plan to reach its objectives include the following: expansion of current production capacity of existing refinery by 1.1m MT to a total of 2.5m MT refining capacity and become the largest sugar refinery in the world by year 2009; acquisition of a domestic sugar producer, Savannah Sugar Company Limited, currently owned by Dangote Industries Limited, to boost local sugar production and reduce cost of importation of raw sugar; continued exploitation of the favourable dynamics of the world sugar market to expand export of products to other African countries and develop production capacity in Algeria; continued improvement on operational efficiencies to drive down cost and improve profitability; maximise local market opportunities with the expansion of the industrial customer base and introduction of new packaging line for retail consumers; vessel acquisition to improve freight cost and working capital management; and strong marketing focus on large scale/ volume buyers.

Ownership of Business

Dangote Sugar Refinery Plc is a subsidiary of Dangote Industries Limited

Benefits Offered and Relations with Government

Broad economic classification of industrial production in Nigeria places the manufacturing of sugar in the Sugar-Cocoa Confectionary sub-sector of the economy. Despite its strategic position as one of the most viable agro-allied industries in the world, the sugar industry in Nigeria has remained one neglected sector of the economy. The industry has failed to induce growth and development with increasing demand for the commodity which existing industrial players can not satisfy.

Although the government has taken conscious steps at liberalizing the market and boosting domestic production by privatizing erstwhile government owned sugar-producing corporations, industry analysis shows a high degree of concentration as the sector is dominated by few firms who are consistently striving to meet the growing annual consumption in the domestic economy.

There are two organizations involved in the regulation of sugar in the economy - National Food and Drug Administration and Control [NAFDAC] and Standard Organization of Nigeria [SON]. The most crucial regulation of NAFDAC is the mandatory fortification of all sugar & sugar products with vitamin A to the value of 25,000 IU/kg, which was introduced in 2005.

Dangote has very close relations with senior politicians in Nigeria. Although his influence might have decreased somewhat after former President Obasanjo stepped down, he remains a powerful businessperson with clear political protection.

Product Development

Dangote Sugar plans to introduce new products that should boost revenue, including smaller packets of sugar to go alongside its current 50-kilogram products. The firm also plans to spend some of its cash reserves to diversify its business by buying sugar mills and farms, which could help insulate the company from volatile global prices for the raw materials it imports.

In its strategic drive to sustain existing market and gain control of neighbouring markets in the West Coast, Dangote Sugar has embarked on an aggressive expansion drive in the West and North African markets.