Dangote Sugar asks shareholders for N500 billion to cut debt, fund growth

Dangote Sugar Refinery Plc is seeking shareholder approval to raise N500 billion through a rights issue, in a fresh bid to repair its balance sheet and fund an ambitious expansion drive after two years of heavy losses.

The capital raise, to be considered at the company’s April 25 annual general meeting in Lagos, is aimed at “deleveraging the company’s financial position, strengthening the capital base and funding strategic and operational initiatives,” including its backward integration projects.

The move marks a shift from the company’s recent reliance on short-term debt, as it pivots toward equity funding to stabilise finances strained by currency shocks and rising borrowing costs.

Losses to partial recovery

Dangote Sugar is coming off a turbulent period. The company posted a pre-tax loss of N72.3 billion in 2025, a sharp improvement from N270.9 billion a year earlier, as revenue rose to N665.6 billion and margins rebounded.

The recovery reflects improved pricing power and easing foreign exchange pressures, after successive naira devaluations since 2023 drove up the cost of imported raw sugar and ballooned finance costs.

Yet the balance sheet remains stretched.

Borrowings stood at N684.4 billion at the end of 2025, while finance costs, though lower, still hit N110.3 billion — continuing to weigh on profitability.

The proposed rights issue signals management’s intent to tackle this debt burden more aggressively, replacing expensive borrowings with equity and reducing exposure to interest and currency volatility.

Equity reset

In the past year, the company leaned heavily on commercial paper markets to manage liquidity, issuing multiple tranches under its N300 billion programme, including N50 billion in October and earlier issuances totalling over N200 billion in 2025.

That strategy helped bridge funding gaps but increased refinancing risks.

The planned N500 billion raise suggests a more structural reset — one that could ease pressure on cash flow and improve investor confidence if executed successfully.

The capital injection also ties directly to Dangote Sugar’s long-term strategy: reducing dependence on imported raw sugar.

The company last year announced a $700 million expansion plan to scale its backward integration programme, targeting 1.5 million metric tonnes of locally produced sugar over time.

Projects in Numan, Nasarawa and Taraba states are expected to boost domestic cane production, while also creating additional revenue streams from ethanol and animal feed.

If delivered, the strategy could shield the company from future currency shocks — the main trigger of its recent losses.

The fundraising comes after a leadership shake-up, with Thabo Mabe appointed CEO in November following the exit of Ravindra Singhvi.

While Dangote Sugar’s shares have gained over 21.58% this year, they dipped 12.06% in March, suggesting investors remain cautious about the pace of recovery.