Blog Details

Dangote Sugar Refinery Plc has launched a N485.88 billion rights issue, offering existing shareholders the opportunity to acquire additional shares.

The offer, which opened on 25 May 2026 and closes on 24 June 2026, is structured on the basis of two new shares for every three ordinary shares held as of the qualification date of April 20, 2026.

The company will issue 8.10 billion new ordinary shares at N60 per share, increasing total shares outstanding from 12.15 billion to 20.24 billion, assuming full subscription.

This represents a 66.67% increase in the company’s share base.

The offer price of N60.00 per share represents 5.51% discount to the qualification date price, and 16.43% to this year’s average price of N71.83.

This means the rights issue price looks reasonably discounted when compared with the stock’s 2026 trading history.

A key question, however, is whether the share price could drop below the N60 offer price before the close of the offer.

However, the investment decision should not be based on the discount alone. The bigger question is whether Dangote Sugar can use the capital raise to reduce balance sheet pressure, lower finance costs, sustain the profit recovery seen in Q1 2026, and reduce the expected dilution effect.

The biggest immediate impact of the rights issue is dilution. Dangote Sugar’s outstanding shares will increase from 12.15 billion shares to 20.24 billion shares, assuming the offer is fully taken up.

This means that the same level of profit will now be spread across a larger number of shares. Based on the company’s Q1 2026 profit after tax of N19.15 billion, earnings per share would fall from about N1.58 to around N0.95 on the increased shares outstanding, if profit remains unchanged.

Without a meaningful improvement in profit, the enlarged share base could weigh future EPS. If Dangote Sugar applies the proceeds to reduce expensive borrowings, strengthen working capital and lower finance costs, the company could improve profitability over time. This would help reduce the impact of dilution.

However, if earnings do not grow fast enough after the rights issue, shareholders may end up owning a company with a stronger balance sheet, but weaker earnings per share.

The key test is whether the company can grow profit faster than the 66.67% expansion in its share outstanding.

The profitability picture provides the strongest argument that the dilution may not be as damaging if Dangote Sugar sustains its Q1 2026 recovery.

In Q1 2026, the company returned to profitability with a profit after tax of N19.15 billion, compared with a loss of N23.65 billion in Q1 2025.

This translated to earnings per share of N1.58, compared with a loss per share of N1.95 in Q1 2025.

When annualized, the Q1 2026 EPS implies about N6.32 per share, which is a major turnaround from the N5.27 loss per share recorded in full-year 2025.

However, the rights issue changes the EPS picture. With shares outstanding expected to rise by 66.67%, from 12.15 billion shares to 20.24 billion shares, the same level of profit will be spread across a larger share base.

On the enlarged post-rights share base, the Q1 2026 EPS of N1.58 would reduce to about N0.95, if profit remains unchanged. On an annualised basis, EPS would reduce from about N6.32 to around N3.79.

This means the rights issue will still dilute EPS in the short term. But compared with the N5.27 loss per share recorded in 2025, even the adjusted annualized EPS of N3.79 would still represent a significant improvement.