GCR Affirms HBM Nigeria AA+/A+ Ratings with Stable Outlook
GCR Ratings has affirmed HBM Nigeria Plc’s national scale long-term and short-term issuer ratings of AA+(NG) and A1+(NG), respectively. The outlook for the rating is stable.
Ratings analysts said in the update released that the affirmation of HBM Nigeria Plc’s ratings reflects its strong financial profile, underpinned by sustained revenue growth, improved earnings and cash flows.
These continue to support a net ungeared debt position and a strong liquidity profile, despite ongoing investments to expand production capacity.
In August 2025, Huaxin Building Materials Group, one of China’s leading building materials producers and a major global cement player, completed the acquisition of an 83.8% equity interest in HBM Nigeria Plc.
The acquisition brought HBM Nigeria within the broader HBM group structure, necessitating a transition to a subgroup analytical approach that incorporates potential for parental support.
GCR said the group’s competitive position assessment remains positive, underpinned by the subgroup’s recent gains in market share, diversified product portfolio, and strong market presence in Southwestern Nigeria.
“Production utilisation rates rank favourably relative to domestic peers, although this strength is moderated by the subgroup’s comparatively modest production capacity”, ratings analysts said.
The ratings note cited that HBM management remains committed to expanding the Ashaka Cement Plant in Gombe State and the Sagamu Plant in Ogun State.
Upon completion, GCR said total installed production capacity is expected to increase to 15 million tonnes per annum from 10.5 million tonnes currently.
“We expect the expansion to be completed by 2027 and supports further market penetration provided capacity utilisation rates remain above those of peers”, ratings analysts said.
HBM Nigeria continues to strengthen its waste-to-energy initiatives, supporting circular economy objectives through the conversion of municipal and industrial waste into alternative fuel for cement production.
In 2025, the subgroup processed approximately 535.7 tonnes of waste for alternative fuel use and had processed over 160 tonnes in H1 2026.
Beyond the resulting operational and cost efficiencies, these initiatives demonstrate the subgroup’s commitment to sustainable waste management practices in Nigeria and contribute positively to its environmental profile.
Group’s revenue increased by 30% to NGN1.1 trillion in financial year 2025 which ended 31 December 2025, translating into compound annual growth rate (CAGR) of 38% over the last five years to 2025.
Ratings analysts said this strong growth trajectory was supported by inflation-driven price adjustments and a gradual recovery in sales volumes.
“We expect revenue growth to remain robust, as evidenced by annualised revenue growth of 27% as of June 2026, underpinned by Nigeria’s significant housing deficit, ongoing government infrastructure projects, as well as management’s strategy to deepen market penetration”.
The rating note said recent cost optimisation initiatives, particularly the diversification of the energy mix towards more efficient and cost-effective fuel sources, strengthened the Groups EBITDA margin to 39% in 2025 from 31% in 2024, with a further improvement to 46% in H1 2026.
“We expect EBITDA margin to remain strong over the rating horizon, supported by sustained volume growth and further benefits from energy efficiency initiatives and operational improvements”, ratings analysts said.
HBM Nigeria’s leverage and capital structure remain key rating strengths, underpinned by the group’s net ungeared position and robust internal cash generation, which have funded ongoing production-capacity expansion without recourse to external debt, according to GCR.
The group’s gross debt, including lease liabilities, declined to NGN1.3 billion in 2025 and reduced further to NGN1.2 billion as of H1 2026.
Coupled with substantial cash holdings, ratings analysts said this has sustained a net cash position. HBM’s net interest coverage strengthened to positive levels in 2025 and H1 2026 as interest incomes exceeded interest expenses.
Similarly, the group’s operating cash flow coverage of debt remained exceptionally strong at over 200% in both 2025 and H1 2026, supported by robust cash generation and low debt levels.
“While the group remains in an expansion phase, we expect leverage metrics to remain commensurate with the current rating level over the outlook horizon, supported by anticipated earnings growth and the absence of immediate plans to incur additional debt”, GCR said.
Ratings analysts stated that the group’s liquidity remains positive, underpinned by uses versus sources estimated at a strong 1.9x over the 18-month period to 31 December 2027.
Liquidity sources comprise cash holdings of NGN330.6 billion and GCR-projected cumulative operating cash flow of NGN794.2 billion through 2027 against anticipated capital expenditure of more than NGN300 billion and projected dividend payments.
GCR said a strategic shift by the new majority shareholder towards materially higher capital expenditure, acquisitions, or increased shareholder distributions could introduce pressure on the subgroup’s strong liquidity position.
The ratings note revealed that group support is currently assessed as neutral, reflecting the absence of a demonstrated track record of technical and financial support from HBM.
The subgroup accounted for approximately 19% of group revenue and 8% of total assets as of Q1 2026, up from 9% and 7%, respectively, in 2025.
“While HBM Nigeria has been rebranded to align with the parent group’s identity following the acquisition, tangible evidence of parental support and strategic integration remains limited”.
The stable outlook reflects analysts’ expectation that HBM Nigeria’s planned capacity expansion and improving production utilisation rates will support further market share gains through enhanced product availability.
GCR said this should drive continued growth in earnings and cash flow generation, thereby sustaining the subgroup’s strong leverage metrics and liquidity profile over the rating horizon.
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