Afrigather Moody’s Scores (Moody’s) has affirmed the Caa1 company household score (CFR) of Dangote Sugar Refinery Plc (DSR).
Concurrently, Moody’s has repositioned the nationwide scale score (NSR) to Ba1.ng from Baa3.ng. The score outlook has been modified to steady from optimistic. Dangote Sugar Refinery is the most important Sub-Saharan African sugar producer and refiner primarily based in Nigeria.
The worldwide score company attributed the change to the detrimental influence of the Naira devaluation on the operations of DSR. The score company in a press release stated, “the affirmation of DSR’s Caa1 CFR and alter in outlook to steady with the repositioning of the NSR to Ba1.ng displays Moody’s view that the corporate’s uncooked materials import enterprise mannequin continues to be negatively affected by the sharp devaluation of Nigeria’s foreign money, the Naira, towards the US greenback over the past 12 months. The foreign money devaluation has deteriorated DSR’s liquidityposition and materially elevated its letters of credit score (LoC) in Naira phrases, weakening the corporate’s credit score profile.”
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In June 2023, the Central Financial institution of Nigeria (CBN) introduced the unification of its a number of international trade home windows, merging all official charges into its Traders and Exporters window which has considerably devalued the Naira, significantly in June 2023 and February 2024 from round 460 Naira per USD in June 2023 to round
1,500 in February 2024.
The optimistic motion to be taken towards the headwinds of the foreign money scenario in Nigeria is to concentrate on the Backward Integration Plan for
sugar manufacturing in Nigeria. DSR has made important investments and can proceed to develop its measurement of the native sugar manufacturing capability.
Given the devaluation of the foreign money which has made domestically produced sugar to have important revenue margin in comparison with imported sugar.
DSR has intensified manufacturing actions at its Numan and Nasarawa sugar plantation. The optimistic motion to be taken towards the
headwinds of the foreign money scenario in Nigeria is to concentrate on the Backward Integration Plan for sugar manufacturing in Nigeria. DSR has
made important investments and can proceed to develop its measurement of the native sugar manufacturing capability. Given the devaluation of the foreign money
which has made domestically produced sugar to have important revenue margin in comparison with imported sugar. DSR has intensified manufacturing
actions at its Numan and Nasarawa sugar plantation.
Based on Moody, elements thought of within the score of DSR embrace the optimistic trade fundamentals supported by authorities regulation and Nigeria’s demographic and societal traits, DSR’s market positioning as Nigeria’s largest producer and vendor of refined sugar, low ranges of Moody’s adjusted debt of NGN62 billion excluding letter of credit score; and monitor file of enough working margin of 18
% over the past 5 years and capability to cross by means of extra prices albeit with a lag.
Additionally, the rankings in accordance with the company, replicate the corporate’s publicity to Nigeria, a rustic that has excessive social, political, financial and regulatory dangers; excessive publicity to international foreign money danger publicity on account of exhausting foreign money imports and native gross sales beneath a depreciating Naira foreign money state of affairs; publicity to commodity value danger volatility by means of uncooked materials imports of sugar; (4) excessive reliance on letters of credit score of NGN420 billion as of 31 March, that are curiosity
bearing and used for exhausting foreign money working capital financing; and weak credit score metrics pushed by a weaker than anticipated working
efficiency and huge international foreign money losses.
“The steady outlook displays our expectation that DSR’s volumes will develop in the direction of the degrees achieved in 2022 over the subsequent 18 months. The
steady outlook additionally assumes that the corporate’s excellent letters of credit score with banks might be rolled over and never improve in measurement, Moody’s Ranking concluded.
