Fitch Keeps Dangote on Rating Watch Negative
Fitch Ratings has maintained Dangote Industries Limited’s (Dangote) National Long-Term Rating of ‘B+(nga)’ and Dangote Industries Funding Plc’s senior unsecured debt rating of ‘B+(nga)’ on Rating Watch Negative (RWN).
The RWN reflects the uncertainty related to the group’s ability to repay or refinance maturing debt in 2025, with the earliest maturity in February 2025, Fitch said. According to the rating note, the company is in talks with its lenders to refinance the debt under new terms, which could include amendments and extensions of the overall debt maturities.
Fitch said a lack of tangible steps to refinance or repay the maturing debt or steps towards refinancing constituting a distressed debt exchange under our rating criteria would lead to negative rating action.
“We do not expect positive rating action until the company’s liquidity position substantially improves.”. The rating note stated that the group has immediate debt servicing requirements related to the syndicated loan raised to finance the refinery construction within Dangote Petroleum Refinery and Petrochemicals (DPRP), which faced delays and cost overruns.
During 9M-2024, the refinery operated at around 50% of its capacity, leaving earnings before interest tax depreciation and amortization (EBITDA) generation below our previous projections.
“We expect the EBITDA contribution from DPRP to gradually improve after gasoline production started in September 2024 and polypropylene plant starts in February 2025. The group plans to divest a 12.75% stake in DPRP, but we view this as uncertain.”.
Analysts at Fitch said they expect Dangote’s 2024 EBITDA margins in cement production to remain largely in line with prior years, driven by volumes pick up and energy cost-saving measures, considering its limited ability to pass on increased raw material costs to consumers. However, the segment remains the group’s key earnings and cash flow contributor.
The average utilisation rate at Dangote’s fertilizer segment—historically the group’s second-largest earnings contributor—improved to around 68% in September 2024 (from 50% in 2023). This was thanks to gas feedstock pipeline repairs.
Fitch stated that further steps are planned to ensure adequate gas supply, mitigating the risk of further operational efficiency issues. As of end-September 2024, Dangote’s liquidity had no headroom under the revolver facility but substantial cash balances.
The group had senior secured syndicated debt of USD2.0 billion at end-2024 (largely due in 2025 and 2026 pre-reprofiling) and a USD1.65 billion loan from its ultimate parent, Greenview plc, classified as on demand debt.
Analysts view the shareholder loan as subordinated debt. The company has also senior unsecured debt to finance Capex at various subsidiary levels. “Dangote’s ratings reflect its elevated refinancing risk in comparison with other issuers rated on the Nigerian National Rating Scale,” Fitch said in the rating note.#Fitch Keeps Dangote on Rating Watch Negative FG to Construct 10,000 Housing Units for Medical Workers Nationwide
