- Home
- Smartmoney
- Dangote Sugar Refinery Plc: A Look at Its 2008 Annual Report (2)
Dangote Sugar Refinery Plc: A Look at Its 2008 Annual Report (2)
- By Bukola Idowu
- Published February 22nd, 2010
- Smartmoney
- Unrated
On page 5 of the AR, the EPS/DIVIDEND ratios for 2007 and 2008 were (179/170) or 1.05294 and (182/120) or 1.5166 respectively. Did it meet the criteria I stated in some earlier paragraphs? Find out.
Again, EPS2/EPS1 for 2007 and 2008 consecutively were (182/179) or 1.016.Did it also meets the stated criterion stated earlier? You have to take a decisive look at that. The dividend decreased rather than increased from 2007 to 2008(or from 170k to 120k) representing a decline of 29 per cent. The accounts receivable for 2007 was N11.003billion whereas that for 2008 was N14.438billion.This represents an increase of N3.435 billion or +31.218 per cent. That sounded impressive.
TEXT INFORMATION: Check the texts. Are you confident in the management of the company or not? If not, you may need to see your shares. Check the company’s financial strength and operating success or failure.
OUTCOMES: Were new plants bought? Were new products introduced? Were the total assets and liabilities higher or lower and why? If yes, why? Did profits rise? Find out the cause. Was it due to fewer outstanding shares (because of repurchase of shares), non-recurring income from the sales property, or higher sales and lower costs. Were some plants closed, subsidiaries sold and product lines discontinued? Are there future needs for financing? Establish the answers from the Chairman’s Statement on page 6-7.What were the reasons for decreased profit: price wars, poor management or elimination of some product or services.
BALANCE SHEET: The balance sheet of Dangote Sugar Refinery Plc for 2008 appears on page 21 of its 2008 AR. Check if cash or liquid assets diminished. Cash assets are those which are held as money or cash. Liquid assets are those which can be converted to cash. Cash and liquid assets were N19,987,129,000 (i.e N19.9billion) in 2007 and N19,847,111,000 in 2008;a decrease of N140,018,000 or -0.7 per cent. Are accounts receivable, inventories or total debts rising?
FINANCIAL SUMMARY: This information appears on page 33 of the AR. Only a 3-year instead of a 5-year period was considered. On page 100 of Teach Yourself Investing and Grow Rich in Capital Markets and Global Electronic Money, I insisted that you watch out for any company that has held long. Fairly consistent record of profitable growth. If you discover any, then it may be expected to do as well or better in the coming years. “Profitable growth” can be measured by the EPS. So in 2006, 2007 and 2008 ,they were 139k,179k,and 182k respectively, representing increments or growth rates of 40k (or 28.77 per cent) and 3k (or 1.6 per cent) respectively. You may have to compare these with the standards I gave earlier.
SHAREHOLDER’S LETTER: This is the letter of the Chairman or Chairman’s Statement as published on pages6-7 of the AR. Did the company meet its previously stated goals? if not, find out why. As I noted in the book, “Teach Yourself Investing and Grow Rich In Capital Markets and Global Electronic Money”, if the tome is overly optimistic, beware. If you are skeptical, do not hold the stock or buy.
LONG-TERM DEBTS: The ratio of long-term debts to long-term capital (i.e long-term debt ÷ sum of long-term debt and shareholders’ equity) gives you a picture of the company’s financial strength. So calculate: LONG-TERM DEBT/(LONG-TERM DEBT+ SHAREHOLDERS’ EQUITY).If this figure is below 50 per cent, the company is probably solid. The more the debt of the company, the less cash it has to weather the storm. Long-term debts was N24,186,000(in 2008) and N21,817,668(in 2007).Shareholders’ equity was N33,922,203,000(in 2008) and N28,306,448,000(in 2007).Hence Debt-Ratios for 2007 and 2008 were (21,817,668,000)/(21,817,668,000+24,306,448,000) OR 0.436 and (24,251,186,000)/(24,251,186,000 +33,922,203,000) OR 0.4850 respectively. You can see that the figure increased signifying greater indebtedness. The lower this ratio, the better is the company and vice versa. Most good companies have a ratio of 1:1 (or 1) or below.
ACCOUNT RECEIVABLES: These are payments the company expects to receive in the near future. If this figure rises faster than sales, it signifies the company’s inability to recover its debts fast. It was N21,817,668,000 in 2007 and N24,251,186,000 in 2008 respectively.
INVENTORIES: These are costs of raw materials, work in progress, and finished goods. Inventory is an itemized list of goods, property etc of a business. If inventory is increasing faster than sales, that may imply that the company is creating more than it can sell. On page 26 of the Annual Report, it was N4,097,643,000 in 2007 and N9,257,767,000 in 2008 respectively. The increment was N5,160,124,000 or 125 per cent. But the ratio of increase of sales (or revenue) is 0.02 per cent (i.e +N21,941,0000).You can see the striking discrepancy.
NET INCOME PER SHARE (OR EARNINGS PER SHARE):It indicates the earnings growth rate of the company. If it increases, the company had recorded growth and vice versa.
Again, EPS2/EPS1 for 2007 and 2008 consecutively were (182/179) or 1.016.Did it also meets the stated criterion stated earlier? You have to take a decisive look at that. The dividend decreased rather than increased from 2007 to 2008(or from 170k to 120k) representing a decline of 29 per cent. The accounts receivable for 2007 was N11.003billion whereas that for 2008 was N14.438billion.This represents an increase of N3.435 billion or +31.218 per cent. That sounded impressive.
TEXT INFORMATION: Check the texts. Are you confident in the management of the company or not? If not, you may need to see your shares. Check the company’s financial strength and operating success or failure.
OUTCOMES: Were new plants bought? Were new products introduced? Were the total assets and liabilities higher or lower and why? If yes, why? Did profits rise? Find out the cause. Was it due to fewer outstanding shares (because of repurchase of shares), non-recurring income from the sales property, or higher sales and lower costs. Were some plants closed, subsidiaries sold and product lines discontinued? Are there future needs for financing? Establish the answers from the Chairman’s Statement on page 6-7.What were the reasons for decreased profit: price wars, poor management or elimination of some product or services.
BALANCE SHEET: The balance sheet of Dangote Sugar Refinery Plc for 2008 appears on page 21 of its 2008 AR. Check if cash or liquid assets diminished. Cash assets are those which are held as money or cash. Liquid assets are those which can be converted to cash. Cash and liquid assets were N19,987,129,000 (i.e N19.9billion) in 2007 and N19,847,111,000 in 2008;a decrease of N140,018,000 or -0.7 per cent. Are accounts receivable, inventories or total debts rising?
FINANCIAL SUMMARY: This information appears on page 33 of the AR. Only a 3-year instead of a 5-year period was considered. On page 100 of Teach Yourself Investing and Grow Rich in Capital Markets and Global Electronic Money, I insisted that you watch out for any company that has held long. Fairly consistent record of profitable growth. If you discover any, then it may be expected to do as well or better in the coming years. “Profitable growth” can be measured by the EPS. So in 2006, 2007 and 2008 ,they were 139k,179k,and 182k respectively, representing increments or growth rates of 40k (or 28.77 per cent) and 3k (or 1.6 per cent) respectively. You may have to compare these with the standards I gave earlier.
SHAREHOLDER’S LETTER: This is the letter of the Chairman or Chairman’s Statement as published on pages6-7 of the AR. Did the company meet its previously stated goals? if not, find out why. As I noted in the book, “Teach Yourself Investing and Grow Rich In Capital Markets and Global Electronic Money”, if the tome is overly optimistic, beware. If you are skeptical, do not hold the stock or buy.
LONG-TERM DEBTS: The ratio of long-term debts to long-term capital (i.e long-term debt ÷ sum of long-term debt and shareholders’ equity) gives you a picture of the company’s financial strength. So calculate: LONG-TERM DEBT/(LONG-TERM DEBT+ SHAREHOLDERS’ EQUITY).If this figure is below 50 per cent, the company is probably solid. The more the debt of the company, the less cash it has to weather the storm. Long-term debts was N24,186,000(in 2008) and N21,817,668(in 2007).Shareholders’ equity was N33,922,203,000(in 2008) and N28,306,448,000(in 2007).Hence Debt-Ratios for 2007 and 2008 were (21,817,668,000)/(21,817,668,000+24,306,448,000) OR 0.436 and (24,251,186,000)/(24,251,186,000 +33,922,203,000) OR 0.4850 respectively. You can see that the figure increased signifying greater indebtedness. The lower this ratio, the better is the company and vice versa. Most good companies have a ratio of 1:1 (or 1) or below.
ACCOUNT RECEIVABLES: These are payments the company expects to receive in the near future. If this figure rises faster than sales, it signifies the company’s inability to recover its debts fast. It was N21,817,668,000 in 2007 and N24,251,186,000 in 2008 respectively.
INVENTORIES: These are costs of raw materials, work in progress, and finished goods. Inventory is an itemized list of goods, property etc of a business. If inventory is increasing faster than sales, that may imply that the company is creating more than it can sell. On page 26 of the Annual Report, it was N4,097,643,000 in 2007 and N9,257,767,000 in 2008 respectively. The increment was N5,160,124,000 or 125 per cent. But the ratio of increase of sales (or revenue) is 0.02 per cent (i.e +N21,941,0000).You can see the striking discrepancy.
NET INCOME PER SHARE (OR EARNINGS PER SHARE):It indicates the earnings growth rate of the company. If it increases, the company had recorded growth and vice versa.
