Moody’s Upgrades Dangote Sugar’s CFR to B3 from Caa1

Moody’s Upgrades Dangote Sugar’s CFR to B3 from Caa1

Moody’s Ratings has today upgraded Dangote Sugar Refinery Plc’s (DSR) long-term corporate family rating (CFR) to B3 from Caa1.  Ratings analysts have also upgraded DSR’s long-term national-scale CFR to Baa1.ng from Ba1.ng; the outlook remains stable.

DSR’s rating upgrade to B3 reflects expectation of a material strengthening in its capital structure following the completion of its NGN486 billion rights issue, Moody’s said

“We expect that the capital increase will enable the company to deleverage its balance sheet and reduce short-term funding pressures. Proceeds will be used for debt reduction, including DSR’s commercial paper and letters of credit (LCs)”.

The transaction follows a related-party advance payment received earlier in 2026, which facilitated immediate debt repayment and was subsequently converted into equity as part of the rights issue.

The company’s financial profile had deteriorated significantly in 2023–2024, driven primarily by the sharp naira devaluation, which increased the local currency cost of imported raw sugar, alongside elevated finance costs and inflationary pressures.

These factors resulted in negative EBITDA, high cash burn and a material build-up in short-term debt, including extensive reliance on commercial paper and LCs to fund working capital.

The completion of the rights issue marks a structural improvement in DSR’s credit profile.

The reduction in short-term debt and refinancing risk, together with improved liquidity, provide the company with greater financial flexibility to support operations and fund its backward integration plan.

Moody’s analysts expect that the strengthened capital structure, combined with improving operating profitability, will support a recovery in credit metrics, although the company remains exposed to foreign-exchange volatility and fluctuations in raw material costs.

DSR’s operating and financial performance in 2025 and early 2026 strengthened and exceeded our prior expectations, following a period of weak operating conditions in 2023–2024 due to naira volatility and DSR’s import-based business model.

DSR finances raw sugar imports through LCs. DSR pays down the LCs through cash generated from operations and short-term borrowings, principally Commercial Papers, when required.

From 2025, the company’s operating profile began to stabilise, supported by higher cost pass-through, cost containment measures and higher production volumes.

In FY2025, DSR reported revenue growth of 25% to NGN829 billion. Operating profit increased to NGN96 billion from NGN12.7 billion in the prior year, supported by lower raw material costs, naira stability and continued cost discipline.

Moody’s-adjusted EBITDA margin improved to 12.4% in 2025 from negative 25% in 2024, and further increased to 18.6% for the last 12 months to March 2026, although still below the 22% peak recorded in 2022.

Moody’s said despite the improvement in operating profitability, the company remained loss-making in 2025 and generated negative free cash flow of NGN63 billion, although trends have improved in 2026.

“We expect DSR’s operating and financial performance to remain stable over the next 12 to 18 months”. The company is likely to benefit from continued cost pass-through to customers and price discipline, more stable macroeconomic conditions and gradual normalisation of working capital, which should support positive free cash flow generation and further deleveraging.

The strengthened liquidity position also provides financial flexibility to advance its backward integration projects, which are expected to reduce reliance on imported raw sugar over time.

However, the company remains exposed to foreign exchange volatility and raw material price fluctuations, which could lead to earnings and cash flow volatility.

In addition, execution risks related to the implementation of the backward integration plan, including potential delays, cost overruns and the broader business transformation from an import-based model to an integrated agricultural and manufacturing operation, could constrain the pace of credit improvement.