Dangote Sugar Refinery Plc H1 2013 Results Presentation August 2013 1
No 1. Refiner in Sub-Saharan Africa Second largest refinery in the world with a capacity of 1.4mm MT p.a, expanding to 2.5mm MT Dominant sugar refiner in Nigeria with 70% market share 650 employees Company Overview Efficient Operations Refinery is located in the Apapa port with a dedicated jetty where over 40,000 MT shipments of raw sugar from brazil are received Warehouses strategically located across the country for efficient distribution Currently achieving 97% production yield Improving financial performance Group Revenue for 6 months at 55bn, 18% EBITDA margin Profit After Tax QoQ up 41% in H1 2013 Zero corporate debt Listed and actively traded on NSE since 2007 2
Investment Highlights Attractive Macro Fundamentals Favourable macro-economic environment for investments Strong sugar market fundamentals characterised by potential upside of current low consumption per capita and increasing demand for sugar High operational, structural and financial barriers to entry (regulatory environment) Leading Market Position #1 sugar refiner in Nigeria with 2nd largest refining capacity in the world Major overall market share of 70% with highly diversified customer base Product diversification to suit customer needs Quality service delivery to trade and corporate clients Strong, well established brand Strong Profitability Track Record Strong historical refining margin preserved at more than 15% Highly effective cost management strategy ensuring profitability Sustained EBITDA margins currently at about 20% Highly cash generative business with over 80% cash conversion 3
Investment Highlights Modern Manufacturing Facilities Sound Growth Strategy Skilled Management State-of-the art technology resulting in lower costs per tonne and product variation Highly scalable, well positioned and efficient infrastructure 16MW power supply system generated inhouse ISO 9001:2000 certified Concluding food certification quality management system Clearly defined strategy to maintain leadership position in domestic and regional market Strategic objective to export in the region, backward integration of upstream sugar Increase penetration as supplier to niche markets i.e. users of molasses, liquid sugar, animal feed, makers of biofuels etc Current top management have proven track record and multi-decade experience (average tenure of c.25 years) Higlhy, skilled technical staff Highly motivated and well trained middle management
Products Non-fortified Sugar Vitamin A fortified sugar 50kg bags Quality grade below ICUMSA 45 Beverages, confectionery, pharmaceuticals 50kg bags Quality grade ICUMSA 45 Restaurants, hotels Customer Category Retail Pack Sugar 250g, 500g, 1kg Quality grade ICUMSA 45 households Corporate Trade ICUMSA International Commission for Uniform Methods Sugar Analysis 5
H1 2013 Highlights Operations 463,320 tonnes refined 97.56% production yield 11,520 tonnes exported Appointment of Mr. Yusuf Suleiman as Chief Financial Officer Financials Sales up to N54bn Profit before tax up 40% up to N11.9bn Earnings per share up 42% to 135k/share Paid out N6bn in dividends 6
Improving Sales and Profits Group 30/06/13 Company 30/06/13 Company 30/06/12 Change (%) Remarks Sales Volume (MT) Nigeria (MT) Exports (MT) 423,804 412,284 11,250 333,996 331,090 2,906 27 25 287 (N million) (N million) (N million) Revenue EBITDA EBITDA Margin (%) 55,034 9,837 18 54,789 10,893 20 53,608 8,111 15 2 34 Higher Price in 2012 Profit before Tax EPS (kobo) 10,859 117 11,915 135 8,493 95 40 42 7
Solid Balance Sheet Non- current assets Group 30/06/13 N million 36,465 Company 30/06/13 N million 23,198 Company 30/06/12 N million 16,640 Remarks Current assets 53,080 66,959 54,241 Total assets 89,545 90,158 70,882 Total Equity 47,395 48,345 41,847 Long term debts 0 0 0 Non- current liabilities 4,315 4,305 3,655 Current Liabilities 37,834 37,507 25,381 Total Liabilities 42,150 41,811 29,035 Total equity and Liabilities 89,545 90,158 70,882 8
Strong Cash Flow Profit before Tax Group 30/06/13 N millions 10,859 Company 30/06/13 N millions 11,916 Company 30/06/12 N millions 8,493 Cash flow from operations 7,013 8,076 5,763 Changes in working capital Net Cash from operations Investments 5,592, 5,592 (1,103) 5,520 5,520 (1,091) 15,796 15,796 241 Financing Increase in cash during the year 0 (1,564) 0 (1,625) 0 11,956 Cash at the beginning of the period Cash at the end of the period 25,099 23,534 24,963 23,339 6,096 18,052 8
FY 2012 FY 2014 FY 2017 A roadmap for the future One refinery in Lagos, 1.4m MT capacity Market leader with over 70% share 6 strategic warehouses across Nigeria Sales offices in 10 cities across Nigeria Exporting to Ghana, Mali, Burkina Faso, Togo and the Gambia Capacity expansion underway Savannah Sugar acquisition completed Retain market leader share Exports to include Liberia, Senegal and Mauritania Savannah Sugar begins to contribute to turnover Acquire farm land to produce Sugar from Cane in: Adamawa Taraba Sokoto Kebbi Kogi Kwara Conversion of molasses to ethanol Refining Capacity increases to 2.75mm MT Produce 250,000MT of sugar from sugar cane Export to the rest of the West African market 100% Conversion to gas Reinforced supply chain management Power generation and sales Revenue N106 bn, EBITDA N16 bn 9
Demand Drivers Population Growth Population of 168m in Nigeria and growing at 3% p.a. Potential to consume food and beverages will increase relatively Consumption expenditure at $122billion in 2011 and growing Income Growth Consumption growth highest in Sub Saharan Africa due to impressive economic development and increased purchasing power Strong macro economic growth will drive income levels upwards, increasing demand for premium foods SSA expected to account for 4-7% of world demand growth for sugar by 2030 (Czarnikow) National ambition set by vision 2020 to increase per capita income to $4000 consumptionpercapita 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Source: USDA Sugar consumption vs GDP/capita 0 1000 High income elasticity of demand and GDP growth in the developing markets give strong sugar growth 2000 3000 4000 5000 6000 GDP per capita (US$) Increasing preference for western food which has high sugar content Alternative uses Increasing political priority of sugar The by products in sugar production promise long term market opportunities 10
angola benin burkinafaso cameroon capeverde centralafricarep chad drc gambia ghana guinea guineabissau ivorycoast liberia mali mauritania 47 niger Nigeria senegal sierraleone togo Market Dynamics Market development opportunity is huge Consumption per capita consumption per capita (kg) Low sugar consumption per capita 7kg 30.0 31.6 compared to global average of 31kg 12.7 10.5 8.8 12.3 12.2 Shows big untapped potential 7.4 4.4 4.6 2.2 1.8 47.9 3.9 6.1 4.7 4.0 7.0 13.3 5.0 7.3 Diversification Impact of high crude oil prices make fuel ethanol the preferred choice Environmental Impact High Domestic Prices compared to world prices 30 26 35 33 High barriers to entry 11 19 10 Port Location ideal for export Ecowas India North America China Far East Latin America EU Middle East Source: USDA, NSDC 11
Goal Growth Strategy Regional expansion Capacity expansion Stated strategy Enter neighbouring African markets focus on the ECOWAS region Increase production capacity to capture regional, domestic and product growth Status Exporting to Ghana, Mali, Togo, Burkina Faso and Gambia Working on Senegal, Mauritania and Liberia Lagos plant expansion to 2.5mt in progress Vertical integration Efficiency Product expansion Cost management Acquire Savannah Sugar Replicate in Kogi, Jigawa, Taraba and Sokoto to produce 1,000,000MT of sugar by 2020 Target production yield of 97% Conversion of molasses to ethanol Increase warehouse capacity and stocks Diversify distribution chain Packaged sugar for retail consumers Vessel acquisition for transportation and storage Savannah acquisition completed Land acquired Currently achieving 97% yield Lagos warehouse expansion completed Sourcing vessels for storage and transport Retail packaging plant commissioned in 2011 Liquid Sugar market established Looking for opportunities To be among the leading integrated low cost sugar producers in the world by doubling production capacity, with strong domestic and regional African presence and increasingly international focus 12
Product Expansion Retail packaging plant commissioned in 2011 Target retail market through with retail packs of 250g, 500g and 1.0kg Explore 10gms retail packs New distributors focused to ensure extensive distribution network Leverage Dangote brand at no additional costs through existing management contract Positive impact on margins given further penetration of value chain at minimal costs Liquid Sugar to Industrial Customers Advanced Plant technology is able to produce run off syrup at different specifications Will be delivered in drums and tankers Expected to increase margins by 3% at 10% of turnover Diversification from Backward Integration Ethanol Molasses Animal Feed Lower ICUMSA grade quality sugar for export 13
Distribution Strategy Priority to grow our markets locally and internationally Organisational structure designed to strengthen output, sales and distribution Largest distribution Network 6 warehouses 350 own trucks for distribution New capacity to extend regional reach Location at sea port for easy export Exporting to ECOWAS region Ghana, Togo, Mali, Burkina Faso and Gambia established Senegal, Mauritania and Liberia to begin Market Share Major Market Share DSR currently has over 70% of domestic market share Key supplier to 5 of 6 large blue chip industrial companies in Nigeria Dangote Bua Imports 14
Export Market Target markets for 2013 include Mali, The Gambia, Burkina Faso, Togo and Senegal Export to all ECOWAS countries (15 countries of c. 310m people) by Q4 2015 Benefit from Nigerian export promotion council incentive of 20% cash back on exports Benefit from no tariff agreements within the ECOWAS zone Region imports1 total of 1.1 m MT due to lack of production facilities Strategic location of refinery in Apapa port to facilitate exports Expansion of Refinery to 2.5m MT will easily accomodate Nigeria and the Region with current total imports of 2.2m MT Rising freight charges will increase regional trade Strong potential for growth on the back of low consumption per capita and growing income and middle class Production, Imports & Consumption- ECOWAS ECOWAS(excl Nigeria) Target Markets senegal togo burkina faso the gambia mali togo sierra leone senegal niger mali liberia guinea guinea bissau gambia ivory coast cape verde cameroon burkina faso benin ghana production imports consumption Source: IMF, International Sugar Organisation, DSR management estimates ¹ Excluding Nigeria 0 100 200 300 400 500 15
Top Management Aliko Dangote is the Chairman of Dangote Sugar Refinery and founder of the Dangote Group. Dangote Group is the largest conglomerate in Sub-Saharan Africa, with interests in many basic sectors such as food, cement, steel, fertiliser etc. The largest shareholder in Dangote Sugar, Dangote Group is also a major shareholder of three other companies listed on the Nigerian Stock Exchange: Dangote Cement, Dangote Flour Mills Plc and NASCON. Between them the four listed subsidiaries have a combined market value of around $12bn. Mr. Dangote is a graduate of Business Studies from Al-Azahar University, Cairo, Egypt. He entered business in 1977 trading in rice, sugar and cement before he ventured into full-scale manufacturing. Mr. Dangote holds the national honour of Grand Commander of the Order of the Niger (GCON) and is the first Nigerian outside of government to receive the honour Abdullahi Sule is the Managing Director of Dangote Sugar Refinery. He is a Mechanical Engineer with a Master of Science degree in Industrial Technology from Indiana State University. He was the MD of DSR between 2007 and 2009;; he re-joined the company in December 2011 and comes with 25 years experience. Prior to Joining Dangote Sugar, he was the Managing Director of African Petroleum Plc and Sadiq Petroleum Nigeria Limited. 19
Investor Relations For further information: Ayeesha Aliyu Ayeesha.Aliyu@dangote.com 01-4480815-6 ext 4073 21