The Dangote Petroleum Refinery has said a drop in crude oil prices will not automatically translate into lower profits for the company.
Vice President of Dangote Industries Limited, Devakumar Edwin, gave the assurance on Friday while speaking during a media tour and briefing at the refinery.
His comments came as the refinery’s ongoing initial public offering continues to attract attention, with concerns that a possible fall in crude prices after the US-Iran conflict could affect the company’s earnings and investor returns.
Edwin explained that the refinery’s profitability is driven mainly by the difference between the cost of crude and the value of the refined products it sells, rather than the absolute price of crude.
He said the current geopolitical crisis could also provide temporary additional earnings for the refinery because disruptions to crude supplies and refined petroleum products have tightened the market.
According to him, some refineries in the Middle East have been unable to operate at full capacity due to difficulties securing crude, while supplies of petroleum products from the region have also been disrupted.
Edwin, however, noted that the additional gains from the supply disruptions would not continue indefinitely.
He said the refinery’s $20bn investment was made based on long-term financial projections and that the company remained on track with its expected returns.
On dividends, Edwin said Dangote Group President, Aliko Dangote, had assured investors that dividends from the refinery would be paid in dollars.
He explained that the refinery’s export activities would generate the foreign exchange needed to support the planned dollar dividend payments. He said about half of its current production is already exported, while the planned expansion is expected to increase exports significantly.
Edwin also said the company chose to launch the IPO after completing and operating the refinery so that investors could assess an established business rather than invest in a project still under construction.
The refinery’s expansion is expected to be completed within three years, although Edwin said the company could finish earlier. The expansion will include petrochemical facilities, a linear alkyl benzene plant and a propane dehydrogenation plant.
He said most of the equipment for the expansion had already been ordered, while the necessary licences and much of the engineering work had been completed.
Edwin added that the refinery would only use intermediate products such as naphtha for blending when it had spare processing capacity and doing so was commercially viable.
He said Dangote Industries was targeting at least 10 million shareholders through the IPO, with the minimum subscription set at N5,250 to make participation accessible to more Nigerians.
The executive also disclosed that refinery employees had been allowed to acquire shares, adding that he was among those who had become shareholders.
