The latest lower within the inventory costs of the Dangote Group, which incorporates Dangote Sugar Refinery and NASCON Allied Industries, has been attributed to overseas change losses and the Securities and Change Fee’s determination to reject their merger request.
Analysts urged that the continued inflationary pressures and foreign exchange volatility have worsened these challenges. The depreciation of the naira has elevated the price of importing uncooked supplies, additional squeezing revenue margins.
From Could to August 2024, Dangote Sugar Refinery’s inventory plummeted by 18.67 per cent from N45.00 to N36.60, on the again of disruptions within the provide chain and risky sugar costs, which have adversely affected the corporate’s monetary efficiency. NASCON Allied Industries skilled a downturn in its inventory value, falling by 12.57 per cent from N37.00 to N32.45 over the identical interval. Nonetheless, Dangote Cement achieved a 41 per cent development in its share value from Could to August 2024, rising from N419 in Could and reaching N591 by early August.
In an announcement dated April and signed by the corporate secretary of NASCON, Adedayo Samuel, it was acknowledged that the proposed merger with Dangote Sugar Refinery Plc and Dangote Rice Restricted has been suspended.
He added that this determination, initially introduced on August 30, 2023, is not going to proceed following the feedback and suggestions from the Securities and Change Fee, which highlighted issues relating to the present non-operational standing of Dangote Rice Restricted. NASCON expressed gratitude to its stakeholders for his or her continued help.
“NASCON Allied Industries Plc. (“NASCON”) at this second notifies the Nigerian Change Restricted and the investing public that, additional to its announcement of August 30, 2023, in respect of the proposed merger of Dangote Sugar Refinery Plc, NASCON and Dangote Rice Restricted, a choice has been taken to droop the mentioned merger presently.
“The suspension is as a result of feedback and suggestion of the Securities and Change Fee centred across the present non-operational standing of Dangote Rice Restricted. NASCON needs to precise its appreciation to all its stakeholders and can maintain the general public knowledgeable of any developments as they come up.”
A shareholders’ advocacy group chief, Bisi Bakare, acknowledged that whereas Dangote Group’s subsidiaries have confronted declines, they’re actively in search of development alternatives and resilience.
“I don’t assume the refinery is enjoying any function in it. It has to do with related challenges dealing with the manufacturing sector.
One of many challenges is the impact of overseas change losses, which arose because of the continual depreciation of the naira.
“Additionally, inflationary pressures, which arose because of a steady improve in inflation, led to a excessive rate of interest on borrowing, which has an untold impact on finance prices and backside line. Additionally, the excessive value of uncooked supplies imported and the excessive value of power. All these components proceed to impression on manufacturing sector of which Dangote Cement isn’t an exception,” she mentioned.
A monetary analyst, Ariyo Olugbosun, attributed the decline to the Securities and Change Fee’s denial of a proposed merger involving Dangote Sugar, NASCON, and Dangote Rice Restricted. Olugbosun argued that the regulatory determination led to a lack of investor curiosity, exacerbating the inventory value fluctuations.
“Whereas FX losses are a priority, the SEC’s determination on the merger has been a serious driver behind the fluctuating inventory costs. The SEC determination is finest identified to them, however I feel it could have helped Dangote make extra revenue,” Olugbosun defined.
In response to issues in regards to the value of Dangote Cement, the President of the Progressives Shareholders Affiliation of Nigeria, Boniface Okezie, in a chat with The PUNCH, highlighted that the fluctuations had been largely pushed by market forces, including that this angle underscores the broader developments affecting the complete sector, not simply particular person gamers.
“The development just isn’t distinctive to Dangote Cement alone. For those who have a look at different firms within the cement business, like BUA Cement and Lafarge, you’ll see related patterns. Regardless of the challenges, Dangote Cement stays larger in worth in comparison with its friends, with BUA Cement following intently.”
Concerning Dangote’s much-anticipated refinery venture, Boniface famous that its efficiency can’t be assessed presently, as it isn’t but a publicly quoted firm, emphasizing the necessity for swift motion to forestall additional injury to the oil and fuel business.
“The refinery isn’t absolutely operational, and till it’s, we will’t gauge its market power,” Boniface defined. They added that ongoing points with the Nigerian Nationwide Petroleum Company (NNPC) and different regulatory our bodies are hampering progress. “Nigeria stands to lose if the regulatory relationships aren’t rapidly resolved.”
Boniface acknowledged that the potential implications for overseas funding are additionally a priority, cautioning that unresolved points may deter buyers from participating with Nigeria. Loads of buyers would possibly draw back from doing enterprise right here”.
He urged for a swift decision to keep up Nigeria’s attractiveness to worldwide buyers, stating, “We urge him to not lose religion within the Nigerian economic system. Although the journey may not be straightforward, his huge investments will yield advantages as soon as the challenges are resolved. It’s a long-term funding, and he gained’t reap the rewards instantly, however he’ll in time,” Boniface added.