A POSITIVE SIGNAL TOWARDS THE SUSTAINABILITY OF THE DIVIDEND
Reassuring achievements, in line with our initial scenario :
In H1-20, Cosumar posted an increase in its consolidated revenue of +3.8% to MAD 4,260 Mn within a challenging economic context marked by the Covid-19 health crisis. However, the lockdown’s repercussions on national sugar consumption during Q2-20 were neutralized by the ramp-up of export activity during the first-half of 2020.
EBITDA remained almost stable at MAD 912 Mn in H1-20. Beyond the "export" effect, this profitability’s resilience can be explained by the smooth running of the sugar crops. Despite the unfavorable weather conditions, the operator would have benefited from improved yield levels in the various regions except Doukkala.
These achievements are consistent with our initial scenario (Cf. Covid-19: Glimmers of hope at the end of the tunnel). The latter anticipated a strong resilience of Cosumar's activity thanks to the "export" and "crop yield" components.
The export activity..., a lever strengthening the resilience of FY 2020 results :
Exports’ volume of white sugar increased by 22.0%, from 257 KT in H1-19 to 313 KT in H1-20.
Also, export selling price of white sugar jumped by more than 14.0% over the same period. In 2020, white sugar prices hit a 5-year high of 451 $/T before falling back to 360 $/T under the impact of the health crisis. The sugar market volatility was fuelled by Brazil's strategic shift in switching its cane harvest toward sugar at the expense of ethanol following the fall in oil prices.
Solid fundamentals, justifying the sustainability of the dividend :
In 2020, COSUMAR is positioned among the resilient stocks in the Equity market. The stock’s high quality is based on the robustness of the Supply/Demand component, the low disruptions in the logistics chain and finally, the room for development of the export activity.
Pending the start-up of the new “Durrah” refinery in Saudi Arabia as well as additional communication from Management, we have kept our growth forecasts broadly stable for 2020E. This represents revenue growth of 3.0% combined with a slight increase in EBITDA of 0.3% and a
decline in recurring NIGS of -5.1%. In addition, the Group would be able to preserve its payout policy through a target DPS of MAD 7.0 equivalent to a D/Y of 3.7% for the FY 2020.
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