Dangote Sugar Refinery Plc (DSR) is currenting in the market shopping for N50billion from series 6, 7 Commercial Paper issuance. The series 6 and 7 Commercial Paper (CP) issuance is under its N150billion Commercial Paper issuance programme.
The net proceeds from series 6, 7 Commercial Paper issuance under the Programme will be used to support Dangote Sugar Refinery Plc short-term financing requirements and general corporate purposes or as may otherwise be described in the Applicable Pricing Supplement. The CP issuance, which is still open, is scheduled to close on Thursday December 12, 2024.
Before now, Dangote Sugar Refinery Plc successfully issued N42.79 billion Series 4 and 5 Commercial Paper notes. The Notes, which were issued under the Company’s N150 billion Commercial Paper Issuance Programme, comprised N12.93 billion 181-day Series 4 and N29.86 billion 265-day Series 5 notes. The Series 4 notes priced at a 23 percent yield while the Series 5 notes priced at a 25 percent yield, with participation from several investor groups, including Pension and Non-Pension Asset Managers, as well as other Institutional and Individual Investors.
Commercial paper issuance programme
Dangote Sugar Refinery established N150billion commercial paper issuance programme on February 6, 2024, under which Dangote Sugar may from time-to-time issue commercial paper notes, denominated in Nigerian Naira, in separate series or tranches subject to compliance with all relevant laws and in accordance with the terms and conditions. The repayment of all obligations under the Programme will be funded from the operating cash flows of Dangote Sugar Refinery, unless otherwise specified in the Applicable Pricing Supplement.
The lead arrangers of the N150billion CP programme are Stanbic IBTC Capital, Absa, and Greenwich Merchant Bank and any other arranger appointed from time to time, which appointment may be for a specific issue or on an ongoing basis. Collecting and Paying Agent are Stanbic IBTC Bank Limited and Greenwich Merchant Bank.
Auditors are PricewaterhouseCoopers Chartered Accountants, while Solicitor is Banwo & Ighodalo.
The Notes issued under the commercial paper issuance programme are in dematerialised form, registered, quoted and traded via the FMDQ Securities Exchange Limited (FMDQ Exchange) platform in accordance with the rules, guidelines and such other regulation with respect to the issuance, registration and quotation of commercial paper as may be prescribed by the Central Bank of Nigeria (CBN) and FMDQ Exchange from time to time, or any other recognised trading platform as approved by the CBN. The securities settle via any central securities depository registered or recognised by the SEC, acting as custodian and clearing agent for the Notes.
Leading player in Nigerian sugar industry
DSR is a leading player in the Nigerian sugar industry, with a market share of about. 55 percent, driven by its combined installed refining capacity of 1.44 million tonnes per annum. The Company currently grows 75 percent of sugar cane used in local sugar production with a dedicated jetty at Apapa ports for efficient receipt of raw sugar imported from Brazil to cover the shortfall.
Dangote Sugar Refinery marketing and distribution are supported by a fleet of over 800 haulage trucks for product delivery across Nigeria. In line with the core objective of the National Sugar Master Plan which is for Nigeria to attain self-sufficiency in sugar production by producing more sugar locally, the Company is working on enhancing its existing refinery operations in Numan, Adamawa State, as well as developing its greenfield sites at the Nasarawa Sugar Company Project, amongst other sites. The Company also intends to achieve 1.5MMT annually from locally grown sugarcane.
Furthermore, the ongoing upgrading of Dangote Sugar refinery, Numan, Adamawa State is expected to generate 32 megawatts of electricity from installation of new turbines and 2 high-pressure boilers of 90 tonnes of steam per hour when completed.
Read also: Dangote Sugar targets N50bn from series 6, 7 commercial paper issuance
Shareholding structure
Shareholding structure of DSR shows Dangote Industries Limited (8,122,446,281 units or 66.87 percent), Aliko Dangote (653,095,014 units or 5.38 percent), and other shareholder (3,371,336,946 units or 27.75 percent). DSR has 12.146billion shares outstanding. The stock stood at N35.15 per share as at Monday December 9. It had reached 52-week high of N89.5 and a 52-week low of N28.55.
Ratings assigned to the DSR
As shown in the CP Programme Memorandum, the Issuer has been assigned a rating of “Baa3.ng” from Moody’s. Also, Agusto & Co affirmed the “A+” rating assigned to Dangote Sugar Refinery Plc. The rating affirmation reflects the Company’s good cash flow and liquidity positions, mainly supported by its favourable trade terms with customers, its moderate leverage metrics.
The affirmed rating also considers DSR’s dominant position in the Nigerian Sugar Industry bolstered by its strong brand awareness, the ongoing backward integration programme into sugarcane production to moderate the reliance on raw sugar imports and its stable, qualified and experienced management team.
Nonetheless, the rating was moderated by Dangote Sugar’s negative shareholder funds subsequent to the 2023 year-end precipitated by the material post-tax losses following the remeasurement of its foreign currency payables amid the significant devaluation of the local currency.
This is in addition to the Company’s considerable exposure to commodity price risks, particularly global sugar prices, the fragile macroeconomic environment (heightened inflationary pressures and continued local currency depreciation), and the impact on its overall business.
DataPro in their corporate rating report for DSR assigned the company long-term rating of A+; short term rating of A1; adding that the rating outlook is stable.
“The short-term rating of A1 indicates good credit quality and satisfactory capacity for timely payment of financial commitments. The long-term rating of A+ indicates low risk. It shows very good financial strength, operating performance and business profile when compared to the standard established by DataPro. This Company, in our opinion, has strong ability to meet its ongoing obligations,” DataPro said in the rating explanation.
Full year 2023 financial …and 9M’2024
In the financial year ended December 31, 2023, Dangote Sugar Refinery Plc revenue grew by approximately 10 percent from N403.245billion in 2022 to N441 billion, primarily supported by the positive impact of the upward price reviews implemented during the year. Gross profit decreased to N86.303billion from N91.963billion in 2022. Likewise, operating profit was down to N72.685billion from N82.410billion in 2022. It reported loss of N73.760billion in 2023 from a profit of N54.742billion in 2022.
Agusto & Co noted that Dangote Sugar’s operating profit margin in 2023 moderated to 16.6 percent in 2023 (2022: 20.3 percent) due to the adverse impact of rising price levels on its business. The rating agency added that DSR reported net unrealised foreign exchange losses of N172 billion in 2023 following the remeasurement of its foreign currency payables (letters of credit) due to the exchange rate unification policy of the Central Bank of Nigeria. “Consequently, Dangote Sugar Refinery Plc reported pre-tax and post-tax loss margins of 24.3 percent and 16.3 percent respectively in 2023”.
“Despite ongoing efforts around revenue growth and cost containment, we expect the higher foreign exchange losses to weigh on the Company’s overall profitability in 2024,” according to Agusto & Co in its final 2024 corporate rating review report on DSR.
Further look at Dangote Sugar Refinery Plc consolidated and separate financial statements for the nine months period ended September 30, 2024 shows group revenue grew to N484.427billion from N309.713billion in 9M’23; while its loss increased to N184.356billion in 9M’24 from loss of N27.027billion in 9M’23.
Read also: Dangote Sugar Refinery’s loss widens to N184.4bn on higher finance cost
About the company
Dangote Sugar Refinery was established in 1999 and commenced its sugar business in the year 2000 as a division within the Dangote Group held through its holding company, Dangote Industries Limited (DIL). Following a strategic decision of DIL to unbundle its various operations, Dangote Sugar Refinery was incorporated as a public limited liability company in 2005.
The restructuring was completed in January 2006, following the court sanction of the scheme of arrangement wherein all the assets, liabilities, and undertakings of the erstwhile sugar division of DIL were transferred to Dangote Sugar Refinery.
DSR was listed on the Nigerian Stock Exchange (now the Nigerian Exchange Limited) in March 2007 following an initial public offering of its shares in 2006. Following a review of its corporate structure, DSR, on September 1, 2020, completed a scheme of arrangement, which successfully effected the merger of DSR and its former subsidiary Savannah Sugar Company Limited.
The Company is involved in refining raw sugar to produce fortified and non-fortified granulated white sugar and distributing same to consumers and industrial customers in Nigeria. Dangote Sugar Refinery, headquartered in Lagos, Nigeria currently has four (4) subsidiaries, Nasarawa Sugar Company Limited, Dangote Taraba Sugar Limited, Dangote Adamawa Sugar Limited, and Dangote Sugar (Ghana) Limited.
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