Table of Contents
Key Points
- Dangote Sugar launches $32 million debt offering to fund expansion amid rising borrowing costs, with Series 6 and 7 yielding up to 30%.
- The Series 6 and 7 commercial papers offer yields of 28.5% and 30%, supporting strategic growth, including increased local sugar production capacity.
- Despite a 56% revenue rise, Dangote Sugar faces after-tax losses due to forex losses and finance costs but remains committed to reducing import reliance.
Dangote Sugar Refinery, a leading integrated sugar business majority-owned by Nigerian billionaire Aliko Dangote, has issued a N50 billion ($32 million) commercial paper as part of its N150 billion ($96.2 million) debt program to fund expansion amid rising borrowing costs.
The offer, available until Dec. 12, 2024, is split into two tranches — Series 6 and Series 7. The Series 6 paper has a 180-day tenor with a 24.99 percent discount rate, yielding an implied return of 28.5 percent. The Series 7 paper, with a 270-day tenor, offers a 24.5524 percent discount rate and a 30 percent implied yield.
Proceeds from the issuance will be directed toward working capital and other strategic growth initiatives as Dangote Sugar advances its mission of reducing Nigeria’s reliance on sugar imports and scaling up its refining capacity.
Growth amid financial strain
Dangote Sugar, which boasts an annual refining capacity of 1.44 million metric tonnes (MMT), is working toward an additional 1.5 MMT capacity as part of its backward integration plan to source raw sugar locally. This aligns with Nigeria’s broader push for self-sufficiency in essential commodities.
The company’s financial performance has been a mix of growth and challenges. For the nine months ending Sept. 30, 2024, revenue soared by 56.41 percent year-on-year to N484.4 billion ($198.9 million).
However, foreign exchange losses and a staggering 176 percent spike in finance costs contributed to an after-tax loss of N184.4 billion ($118.4 million), a 582 percent increase compared to N27 billion ($17.4 million) in the previous year.
Currency devaluation and high borrowing costs continue to weigh on Dangote Sugar’s bottom line, but the company has actively sought funding to mitigate these impacts. Earlier this year, it raised $28.83 million via a similar commercial paper offering.
Dangote’s market leadership and vision
Majority-owned by Africa’s richest man, Aliko Dangote, who controls a 72.25 percent stake valued at $198 million, Dangote Sugar remains a dominant force in Nigeria’s sugar industry.
Despite economic headwinds, the company is committed to maintaining its leadership position while expanding its global footprint.
With a net worth of $28 billion according to the Bloomberg Billionaires Index, Dangote’s continued investments in sugar refining demonstrate his strategic vision for a more self-sufficient and globally competitive Nigerian economy.
The latest capital injection reinforces Dangote Sugar’s resilience and ambition to drive sustainable growth, even as Nigeria grapples with economic challenges.
