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Dangote sugar refinery positions for higher profitability

The merger between Dangote Sugar Refinery (DSR) Plc and Savannah Sugar Company Limited, is expected to provide strategic opportunities and benefits for the company, employees and other stakeholders as the new company would be operating from the position of increased access to capital and then higher profitability.

A merger is the combination of two companies into one by either closing the old entities into one new entity or by one company absorbing the other. In other words, two or more companies are consolidated into one company.

Over 100 countries around the world produce a total of 180 million tonnes of sugar annually, of which around one-third is sold internationally. Brazil is the largest producer and exporter, with around 55 to 60 per cent of world raw sugar exports.
Currently, the global food and beverage sector is a major driver of sugar consumption and is expected to create a positive impact on the sugar industry. The market growth is anticipated to continue in the long term.

Africa grows only about five per cent of the world sugar production. South Africa is the leading producer followed by Sudan, Kenya and Swaziland. In Africa, sugar output is projected to increase by 49 per cent by the end of 2025 as a result of production expansion in Sub-Saharan countries. With its favourable agronomic conditions, Africa has significant potential to contribute towards the production needed to meet this growing demand.

The sugar industry in Africa is one of the key industries which contributes in providing jobs for the growing unemployment as well as instrumental in rural development. This will reduce the high rates of migration from rural to urban areas and many associated problems.

The goal of Dangote Sugar Refinery, Sugar for Nigeria Project Master Plan is to become a global force in sugar production, working within Nigeria’s National Sugar Master Plan to end importation, produce 1.5MMT/PA of refined sugar annually from locally grown sugarcane.

The target will help Nigeria achieve sugar sufficiency and support export to neighbouring countries. To achieve this goal, Dangote Sugar Refinery acquired Savannah Sugar Company Limited, in December 2012.

Located on 32,000 hectares, the Savannah Sugar estate has considerable opportunity for expansion, which will be augmented by acquiring additional sites that are suitable for sugarcane plantation required for the Project. This will see to the achievement of 1.08M MT/PA refined sugar in the 6 years, in phase one, and eventually the target 1.5M MT/PA of refined sugar, from locally grown sugar cane, across various sites in Nigeria over 10 years.

Recently, Dangote Sugar Refinery Plc listed an additional 146.88 million ordinary shares on the daily official list of the Nigerian Stock Exchange (NSE). In a statement signed by the head, Listing Regulation Department of NSE, Godstime Iwenekhai, the additional shares listed arose from the scheme of Merger between Dangote Sugar Refinery Plc and Savannah Sugar Company Limited.
“With this listing of the additional 146.88 million ordinary shares, the total issued and fully paid up shares of Dangote Sugar Refinery has now increased from 12 billion to 12.147 billion ordinary shares of 50 kobo each,” he stated.

It would be recalled that the shareholders of the company recently at the Extraordinary General Meeting (EGM) gave their approval for the formal takeover of Savannah Sugar Company Ltd (SSCL), as part of an expansion strategy for Dangote Sugar Refinery, and the next stage of its backward integration plan to revolutionise the sugar sub-sector of Nigeria’s economy.

Chairman of the company, Alhaji Aliko Dangote, said the DSR, a top tier player in the industry with install capacity to produce 1.44 million metric tones per annum will be leveraging on the savannah sugar’s sugarcane production capacity to enhance its production capacity.

According to him, Savannah Sugar has 32,000 hectares of land available for cultivation of sugar cane as well as milling capacity of 50,000 tonnes of sugar per annum and that upon the merger, further investments would be made to increase SSCL land under cultivation.

Dangote explained that the DSR board considered the merger as fair and reasonable and believed that it would provide strategic opportunities and benefits for the company, employees and other stakeholders as the new company would be operating from the position of increased access to capital and then higher profitability.

He listed some of the benefits of the merger as being to consolidate the assets, intellectual property rights, operations, and business dealings of the SSCL into the DSR; eliminate cost inefficiencies arising from duplication of resources and processes and improve the efficiency through more focused management of resources and position it as the biggest integrated sugar producer in Nigeria.

The chairman of the company explained that the merger would positively assist the sugar sectorial landscape as the federal government’s backward integration policy would be better implemented by the company.

Meanwhile, the shareholders of the company, urged the government to protect the manufacturing sector through incentives and promotional policies.
In his reaction, foremost shareholder activist, Sir Sunny Nwosu, charged Dangote Sugar to increase local production by setting more sugar plantations as to make Nigeria sufficient in sugar production. He said Dangote has achieved this feat in cement which has made Nigeria a net exporter of cement adding that it is possible to replicate same in sugar production.

Nwosu was particular that management should increase production volume now that the borders are shut and develop export capabilities as to increase sales and profit.

Dangote Sugar commenced business in March 2000 as the sugar division of Dangote Industries Limited. The sugar division was spun-off as Dangote Sugar Refinery Plc via a Scheme of Arrangement in January 2006 which transferred all the assets, liabilities and undertakings attributable to the sugar division of Dangote Industries Limited to Dangote Sugar Refinery. Dangote Sugar Refinery located at Apapa Port Complex was commissioned in 2001.

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