Dangote Petroleum Refinery has reassured prospective investors that a decline in crude oil prices amid the ongoing US-Iran war will not immediately affect its profitability.
Devakumar Edwin, Vice President of Dangote Industries Limited, gave the assurance on Friday amid concerns that falling crude prices could reduce returns on investments in the refinery’s planned initial public offering (IPO).
Speaking during a media tour and briefing at the refinery, Edwin explained that refining margins, rather than the absolute price of crude oil, determine the company’s profitability.
“The crude price will not directly have an impact on profitability. Because, let us say, you are a trader. You are importing stationery and selling. You want to have a 20 per cent profit margin. Whatever your import price is, you will add the 20 per cent and keep your profit margin.
“So, your import price is not going to affect your profit margin because you are focused on your margins. So, the same way, when the crude price goes up, our product’s price will go up. When the crude price comes down, the product’s price will come down,” he stated.
Edwin was reacting to worries about how the US-Iran confrontation may affect crude prices and, in turn, the refinery’s profitability and shareholder returns.
However, he said that the ongoing geopolitical turmoil would momentarily increase the refinery’s profitability due to disruptions in the supply of refined petroleum products rather than higher crude costs.
Dollar dividends
An executive at Dangote confirmed that company president Aliko Dangote has assured prospective investors dividend payouts from the refinery will be disbursed in foreign currency.
In response to concerns that the initial N525 share price might decline post-listing, Edwin stated that the company expects a substantial appreciation in value alongside strong dividend yields. He noted that the company president explicitly committed to paying out dividends in U.S. dollars.
He explained that the foreign currency required to fund these dividend distributions will be generated directly from the refinery’s export revenue.
The commitment comes as the refinery seeks to attract millions of Nigerian investors through its upcoming initial public offering. Edwin stated that Dangote Industries intentionally chose to issue shares after the refinery was completed, commissioned, and operational, rather than raising capital during its construction phase.
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