We maintain our cautious outlook on Dangote Sugar Refinery Plc (NGX: DANGSUGAR) due to its significant exposure to FX volatility and high reliance on short-term borrowings. The former is driven by the company's dependence on imported raw sugar, with its backward integration program remaining a medium-to-long-term play. The latter is consistent with the relative deterioration in its cash conversion cycle from negative 343 days in FY’23 to 103 days in FY'24 and 71 days in Q1'25. That said, the relative stability of the Naira and management's proactive steps to reduce foreign currency liabilities—particularly U.S. dollar-denominated Letters of Credit (LCs)—through operational cash flows, offer some relief.
