Refinery profit won’t fall with crude prices – Dangote

Dangote Petroleum Refinery has reassured potential investors that a decrease in crude oil prices following the ongoing US-Iran war will not adversely affect the refinery's profitability. Devakumar Edwin, Vice President of Dangote Industries Limited, made the statement during a media tour and briefing at the refinery. Edwin clarified that the company's profitability is determined by refining margins, not the absolute price of crude oil.

He explained that firms focus on maintaining a certain profit margin, similar to how a trader would add a 20 percent profit margin to an imported product regardless of its import price. Edwin assured that as crude prices rise, the company's product prices will also rise, and as crude prices fall, product prices will fall accordingly.

Edwin addressed concerns about the potential impact of the end of the US-Iran conflict on crude prices and the refinery's profitability. He stated that the temporary boost in profitability might arise from disruptions in the supply of refined petroleum products due to the geopolitical crisis, rather than higher crude prices. Edwin said that some refineries were unable to operate at full capacity due to insufficient crude supply, while refineries in the Middle East were also unable to meet their usual product volumes.

However, he assured that this additional profitability, stemming from the supply disruption, would eventually diminish.

The Dangote executive also addressed the expected dividend payments to shareholders, reassuring that dividends would be paid in foreign exchange, specifically in dollars. Edwin mentioned that Dangote Industries believes in substantial value appreciation and dividends for shareholders. He mentioned that 50 percent of the company's earnings will come from exports, and the new refinery will export 100 percent of its production.

As a result, foreign exchange generation will be significant, justifying the assurance of paying dividends in dollars.