24 July 2018 ( Lagos ) : All key line items on the P&L declined y/y. Even though DSR’s H1 PBT beat analyst's forecast by 7%, on an annualised basis, it is currently tracking well behind consensus’ full year PBT 2018E estimate of N46.1bn. Therefore, analysts expect downward adjustments to consensus forecasts on average and a negative reaction by the market to these numbers.     

On a positive note ,Sequentially, Q2 sales grew by 4.4% q/q while PBT and PAT improved by 37% q/q and 41% q/q respectively. Sugar volume sales were up by c.3% q/q to 151,580 tonnes while analysts estimate prices in Q2 were marginally higher at N267,720/tonne.

On a negative note ,Q2 sales declined by -27% y/y to N42.9bn while PBT and PAT also fell by -37% y/y and -40% y/y respectively. It appears smuggled sugar across the border continues to place downward pressure on revenues and market share. Y/y, DSR have cut prices by c.-14% y/y while sugar volume sales have declined by a similar magnitude. Production at Savannah Sugar Company (SSC), DSR’s pioneer backward integration project, declined y/y by around -37% to just 2,506 tonnes in Q2 due to rising insecurity in Adamawa State. Additionally, gross margin contracted by around -191bp y/y to 30.3% while operating expenses grew by 34% y/y to N2.3bn.  

Analysts rate the stock Neutral. Their estimates are under review.

Source : Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.

Reporting for EasyKobo on Tuesday, 24 July 2018 in Lagos, Nigeria