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 alternate losses and the Securities and Exchange Commission’s choice to reject their merger request.
Analysts steered that the continuing 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 May 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. However, Dangote Cement achieved a 41 per cent development in its share value from May to August 2024, rising from N419 in May and reaching N591 by early August.
In a press release dated April and signed by the corporate secretary of NASCON, Adedayo Samuel, it was said that the proposed merger with Dangote Sugar Refinery Plc and Dangote Rice Limited has been suspended.
He added that this choice, initially introduced on August 30, 2023, won’t proceed following the feedback and suggestions from the Securities and Exchange Commission, which highlighted considerations relating to the present non-operational standing of Dangote Rice Limited. NASCON expressed gratitude to its stakeholders for his or her continued assist.
“NASCON Allied Industries Plc. (“NASCON”) at this second notifies the Nigerian Exchange Limited 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 Limited, a choice has been taken to droop the mentioned merger at the moment.
“The suspension is due to the comments and recommendation of the Securities and Exchange Commission centred around the current non-operational status of Dangote Rice Limited. NASCON wishes to express its appreciation to all its stakeholders and will keep the public informed of any developments as they arise.”
A shareholders’ advocacy group chief, Bisi Bakare, said that whereas Dangote Group’s subsidiaries have confronted declines, they’re actively searching for development alternatives and resilience.
“I don’t assume the refinery is enjoying any function in it. It has to do with comparable challenges going through the manufacturing sector.
One of the challenges is the impact of overseas alternate losses, which arose because of the continual depreciation of the naira.
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“Also, inflationary pressures, which arose as a result of a continuous increase in inflation, led to a high interest rate on borrowing, which has an untold effect on finance costs and bottom line. Also, the high cost of raw materials imported and the high cost of energy. All these factors continue to impact 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 Exchange Commission’s denial of a proposed merger involving Dangote Sugar, NASCON, and Dangote Rice Limited. Olugbosun argued that the regulatory choice led to a lack of investor curiosity, exacerbating the inventory value fluctuations.
“While FX losses are a concern, the SEC’s decision on the merger has been a major driver behind the fluctuating stock prices. The SEC decision is best known to them, but I think it would have helped Dangote make more profit,” Olugbosun defined.
In response to considerations in regards to the value of Dangote Cement, the President of the Progressives Shareholders Association 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 traits affecting the whole sector, not simply particular person gamers.
“The trend is not unique to Dangote Cement alone. If you look at other companies in the cement industry, like BUA Cement and Lafarge, you’ll see similar patterns. Despite the challenges, Dangote Cement remains higher in value compared to its peers, with BUA Cement following closely.”
Regarding Dangote’s much-anticipated refinery venture, Boniface famous that its efficiency can’t be assessed at the moment, as it’s not but a publicly quoted firm, emphasizing the necessity for swift motion to forestall additional harm to the oil and gasoline trade.
“The refinery isn’t fully operational, and until it is, we can’t gauge its market strength,” Boniface defined. They added that ongoing points with the Nigerian National Petroleum Corporation (NNPC) and different regulatory our bodies are hampering progress. “Nigeria stands to lose if the regulatory relationships aren’t quickly resolved.”
Boniface said that the potential implications for overseas funding are additionally a priority, cautioning that unresolved points might deter buyers from participating with Nigeria. Plenty of buyers would possibly draw back from doing enterprise right here”.
He urged for a swift decision to take care of Nigeria’s attractiveness to worldwide buyers, stating, “We urge him not to lose faith in the Nigerian economy. Though the journey might not be easy, his massive investments will yield benefits once the challenges are resolved. It’s a long-term investment, and he won’t reap the rewards immediately, but he will in time,” Boniface added.