We’re building the largest sugar
refinery in the world – Abdullahi Sule, MD,
Dangote Sugar Refinery
By LOUIS IBA
Monday, May 26, 2008
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•Abdullahi
Sule
Photo: Sun News Publishing |
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Managing Director, Dangote Sugar Refinery (DSR), Mr. Abdullahi
Sule, is barely a year old as the helmsman of Africa’s
largest sugar refining company. But a man of tall dreams,
Sule, within a few months of being in charge of the company,
has shown that initiating programmes to change the fortunes
of an establishment for the better is not necessarily conditioned
by time and days spent there.
According to him, vision, experience, hard work, and teamwork
are the basic virtues any leader needs to make an impact.
And no one can deny Sule the experience of turning around
the fortune of a company.
Prior to his joining DSR, Sule, as Managing Director/CEO,
of a debt-ridden African Petroleum Plc, had taken the oil
marketing company to the path of profitability in a manner
that attracted the applause of many shareholders and analysts
who had written off the oil firm.
An American-trained engineer, Sule, who obtained a Bachelor
of Science degree in Mechanical Engineering and Master of
Science degree in Industrial Technology from Indiana State
University, USA in 1983 and 1984 respectively told Daily Sun
that his vision is to transform DSR into the largest sugar
refinery in the world.
According to him, DSR, at its present refining capacity of
1.4million metric tonnes per annum holds the record of having
the second largest refinery worldwide. It is second only to
Alkhaleej Sugar Refinery in Dubai, which is the largest in
the world.
But he said, plans are underway to increase the refining capacity
to 2.5million metric tonnes, which would make it the largest
in the world.
“DSR has the capacity to refine 1.4 million metric tonnes
of sugar per annum at present,” he said. “But
currently, we are in the process of expanding to 2.5 million
metric tonnes per annum which will easily make it the largest
sugar refinery in the world. In fact, we are building the
largest sugar refinery in the world,” he added.
He also spoke on the performance of the Nigerian economy and
factors hampering the growth of the manufacturing sector.
Excerpts:
About the company
Dangote Sugar Refinery commenced business in March 2000 as
the sugar division of Dangote Industries Limited. Dangote
Industries Limited had initially entered the sugar business
in 1978 through the importation and trading of white sugar.
Dangote Industries commenced white sugar production in 2000
and commissioned the sugar-refining factory located at Apapa
port in 2001.
In January 2006, the sugar division was spun-off as Dangote
Sugar Refinery Plc via a scheme of arrangement, which transferred
all the assets, liabilities and undertakings attributed to
the sugar division of Dangote Industries to Dangote Sugar
Refinery Plc.
The refinery imports and refines raw sugar using the new technology
of Ion Exchange Raising (IER) to purify sugar to an internationally
accepted quality standard.
In compliance with NAFDAC’s directive which makes the
fortification of staple foods mandatory in Nigeria, Dangote
Sugar Refinery produces and packages Vitamin A white sugar
in 50kilogramme bags for direct consumption under the brand
name ‘Dangote Sugar’ as well as unfortified white
sugar for industrial use.
The company became listed on the Nigerian Stock Exchange in
March 2007, following very successful initial public offering
in which 30 per cent of the company came out of existing shareholding
of Dangote Industries Limited.
In November 2007, the company won the best-quoted company
in the Food and Beverage sector, as well as the second best
quoted company on the floor of the Nigerian Stock Exchange.
DSR emerged the best African IPO for 2007 by African Investment
Index Series.
Sule said the company has consistently paid quarterly dividends
of, at least, N4billion to its shareholders.
The Nigerian economy
Generally, the Nigerian economy has seen a tremendously amount
of growth and has acquired, more importantly, what I call
an identity. In the past, people outside Nigeria could not
truly identify the Nigerian economy because of the instability
in our polity, our indebtedness, and our record as one of
the most corrupt nations of the world. And part of the instability
that we have had, had to deal with the unrest in most part
of the country, religious, ethnic and some regional unrest
that we have had. Part of the problems also has to do with
the poor state of our infrastructure. Power, water, roads,
and all these have contributed to the negative perception
of the country. And the aspect of the infrastructure and also
the problem of corruption have a lot to do with the government
itself.
And you also want to ask how far has the government been able
to deal with the instability within itself? Now, with a few
reforms that have been executed so far, we can say that we
have seen light at the end of the tunnel.
So, Nigeria is beginning to be admitted and respected in the
comity of nations. That aspect has given us some improvements
when it comes to the economy.
But there is still a lot of work to be done especially in
the areas of corruption and infrastructure. But generally
speaking, the Nigerian economy is beginning to see some level
of stability and improvement because there is a high level
of confidence to invest in the economy by both the local and
international investors.
And I give you an example. Talking about Dangote Sugar Refinery
as a company, we went to the capital market in 2006 and many
of those who bought the IPO for the 30 per cent that we gave
out, were foreign investors. We had a lot of companies coming
from Europe to buy part of the shares of the company. Similar
to what you had seen happen to the banks that went to the
capital market to raise funds.
Again, you can see that this shows the level of confidence
from investors abroad.
Manufacturing sector crisis
Part of the problems has to do with government policies. Government
policies have been part of the concerns of operators when
it comes to being able to compete with goods from abroad.
There have to be some tariff regimes in place, and also some
government protection in place for the local industries to
survive. This is applicable in any country around the world.
Anywhere you go, there are government policies that are intentionally
placed there to protect the local industries or manufacturers.
Some of the government policies when violated or not in place
at all affect the local manufacturers and make it difficult
for them to be able to compete.
In Dangote Sugar Refinery, we are a little bit lucky and we
thank God and the government for having policies in place
that have been able to protect the company. As a result of
the protection, we have been able to do well because of the
tariff regime in place. And we have also been able to make
a lot of investments and also created lots of jobs for Nigerians.
For example, Dangote Sugar Refinery currently is not connected
to the national grid, so we generate 100 per cent of the electricity
that we use. So far, a company that has made that level of
investment, then it is not out of place if there are tariff
regimes in place to protect the company from foreign imported
goods. The reason is simple, when manufacturing firms have
to generate their own electricity, it becomes impossible for
them to operate, make profits or compete because of the high
cost borne by generating the electricity. Some of them use
diesel, which is very expensive. So, these are some of the
difficulties confronting Nigerian companies and unlike companies
in China where most of the infrastructure are available and
cheap.
Most of the refineries in the world, whether crude oil or
sugar, must have constant source of power. That is why for
us, we generate our power, using turbo generators. The capacity
is 18 mega watts.
Then you must have some process of heating some refinery boilers,
and in DSR we use boilers. In DSR, we have currently over
600 members of staff, and only 20 of them are expatriates.
So, we try to hire competent hands locally to run the refinery
and we have been successful.
What makes DSR unique
The fact is that DSR is the pioneer sugar refinery in Nigeria.
The refinery is a world class facility designed and installed
by Tate & Lyle for the production of refined sugar in
Nigeria for direct consumption and industrial needs, with
an initial capacity to process 600,000 metric tonnes. Tate
& Lyle is the largest sugar refiner in Europe and its
refining technology is regarded as one of the best in the
world.
The company’s operation comprises two key business areas:
Refining of raw sugar imported from Brazil and the marketing
and distribution of the sugar for direct consumption and industrial
needs.
In the past, we had sugar producers in Bacita, Kwara and the
Savana Sugar Company in Adamawa. But these are integrated
sugar cane manufacturers being converted into sugar. Now,
when you have a stand-alone refinery like ours, the refinery
usually produces more sugar than the integrated sugar cane
producers.
DSR is the second largest refinery worldwide. It is second
only to Alkhaleej Sugar Refinery in Dubai, which is the largest
in the world. DSR has the capacity to refine 1.44 million
metric tonnes of sugar per annum and currently in the process
of expanding to 2.5 million metric tonnes per annum, which
will easily make it the largest sugar refinery in the world.
In fact, we are building the largest sugar refinery in the
world.
The second advantage we have is the location of the refinery.
The refinery is located right at the heart of Apapa port.
So, as a result, sourcing raw material is made very easy.
We source from Brazil, and it takes about 12 days for the
raw sugar cane from Brazil to arrive the Apapa port. The refinery
has its dedicated jetty, so the raw sugar that is imported
comes directly from Brazil and is discharged in a week. So,
you actually would have made a lot of savings in several areas;
you make savings from the freight, savings from the period
of your production, export is also easy, you make several
kinds of savings as a result of the location of the refinery.
If the sugarcane were to be imported from India for instance,
it would have been a different case, all together, taking
longer period. AS I told you earlier that we generate our
own power, there is no period of shutdown, unless the company
itself wants to shutdown for one kind of maintenance work
or the other. Because we are producing daily between 3,500
and 4,000 metric tonnes of sugar daily, we have to keep the
machines working as we are in continuous production as the
volume of production is large.
And we also have the advantage in that the Nigerian market
is a very huge market, because of the population of Nigerians
and also because of the number of companies that we have.
And for the fact that our company is located in Lagos, and
most of the big companies that use sugar are also located
in Lagos, this gives us an added advantage.
Now, the companys also has gone away from being a net borrower
to being a net depositor. The company cash flow is excellent,
and the companys profit making has been fantastic also. It
is a company that has continuously made profit in terms of
billions and billions of Naira. Two years ago, the company
made about N16 billion as profit in 2006.
In 2007, it made N31 billion profit before tax, so these are
the kind of numbers that are accumulated in favour of the
company. The company is also debt free. It doesn’t owe
anybody any money what so ever. So, as a result, the company
has deposits in various banks of over N20 billion. And these
are kind of fundamentals that have helped the company to be
as successful as it is.
The company is being run by Nigerians, and as a result of
that, the problems we incurred as a result of staffing expatriates
do not exist in the company. So, these are some of the advantages
that make the company’s fundamentals fantastic.
My management style
Am bringing along teamwork to this company. I believe that
as a manager, it is going to take a combination of experts
and only professionalism of the various departments and the
various sectors of the company to make it successful.
So, am bringing along my vision of teamwork as far as the
entire staffing of the company is concerned. Now, next is
the direction we are going. We actually want to be the best,
when it comes to size, we want to be best when it comes to
profitability, and when it comes to the shareholders satisfaction.
We want to be the biggest refinery of sugar worldwide and
we have started in that direction already as I told you earlier.
And for you to be the best, you have to carry everybody along,
and you have to convince everyone to share your own vision.
So, those are the kinds of things we are bringing into the
company, to make sure that we share the same vision, we are
going in the same direction, and to find out what the problems
of every departments are, we come together to resolve the
problems of every department as a team, so when we are able
to do that, we are taking the company to the next level.
What I tell shareholders is that they had an excellent company
yesterday, and they have a very good company today, and they
have another super excellent company tomorrow because the
future of the company actually is better than what has happened
in the company in the past.
Once the company came from a 650,000 metric tonnes per annum
capacity, we are going to a 2.5million metric tonnes capacity
per annum, so we are growing bigger.
The company has gone from a company that was making N3billion,
N4billion to N10billion profit. For instance, our target for
2008 is N37 billion. We want to have 20 per cent improvement
in what we had last year. And so far from our result of the
first quarter, it looks that we are in the right direction.
So, that is the kind of company we are running and it is now
a company that has also gone beyond Nigeria, so we are talking
to shareholders who used to have small sugar refinery based
in Lagos, targeting only the Nigeria market, today we are
targeting beyond Nigerian market.
We have gained a deep understanding of the Nigerian sugar
market, and would exploit its main strategy of developing
new markets and growing distribution network to deliver Dangote
Sugar at every nook and cranny of the country and beyond.
We are going to Ghana, Senegal, Gabon, Central of Africa Republic
and Ivory Coast, we are now going global.
Challenges of going global
The biggest challenge is understanding the market. Before
we go into any market, we have to go and understand what that
market is all about, what they are looking forward to. Is
it not just a country that consumes sugar, is it a country
that consumes sugar of what type? You know sugar is usually
measured by its colour. So, in most of these countries we
are going to, they are consuming sugar from refinery that
are not of purity of colour, instead they are used to their
normal sugar, product directly from sugarcane, which mostly
is of higher colour.
The refinery we have has the capacity to refine the purest
colour of sugar that is obtainable, so going to understand
the market in those areas and the fundamentals of what they
need and their tariffs is important. That is why we are beginning
with West African market because of the ECOWAS incentives
as tariffs, levies that are reduced. But we are also having
interests from Ethiopia to buy sugar from us and have interest
from the government of Sudan as well. One big advantage that
gives our sugar in hot demand is that it is fortified with
vitamin A. Only two countries in the world, actually make
it mandatory to fortified your sugar with vitamin A, that
is Nigeria and Zambia, which is an initiative of the United
Nations.
So, as a result of that, we talking about the second largest
refinery in the world, producing 80 per cent of the sugar
that is fortified with vitamin A. So, that is another advantage
that you have from some countries that want to take advantage
of our sugar that is fortified with vitamin A, and that may
be the only source of sugar for that country which will be
from the Dangote Sugar Refinery.
Battling smugglers
We do experience some form of problems with smuggling but
it has to do with other countries who happen to smuggle cheaper
sugar of higher colour into Nigeria. But their sugar is not
fortified with vitamin A. What people don’t generally
understand is that we can make the same quality of sugar and
sell at the same price or even cheaper.
If you tell me to go ahead and produce sugar without fortifying
it with vitamin A, I can do it and sell it even at a cheaper
price than those imported or smuggled into the Nigerian market.
But the truth is that if I have to buy expensive vitamin A
and if I am going through more refining processes to meet
the local standard, then I cannot compete with the cheap sugar
being imported into the country.
But we thank the Nigerian Standards Organisation and NAFDAC
for the strict regulation of the sector and educating Nigerians
on the benefits of buying sugar furtified with vitamin A,
which is also better for their health. |
