GCR Downgrades Dangote Industries Ratings, Outlook Evolving
GCR Ratings has downgraded Dangote Industries Limited’s national scale long-term and short-term issuer ratings to A+(NG) and A1(NG), respectively, from AA+(NG) and A1+(NG) previously.
The ratings agency also downgraded the group’s national scale long-term issuer rating accorded to each of Dangote Industries Funding. The funds downgraded include Series 1 Tranche A and Tranche B Bonds as well as the Series 2 Bond to A+ (NG) from AA+ (NG) previously.
With the expectation that if the Group’s cash flow improves in less than 18 months, the outlook on the group’s ratings will be revised to evolving from rating watch negative.
“The downgrade of Dangote Industries Limited’s ratings reflects the spike in short-term debt following the ramp-up of operations at the refinery as well as the lingering impact of adverse exchange rate movements on the loan book in financial years 2023 and 2024.
“As such, overall leverage and capital structure remain constrained despite improvements during 9M 2025 with potential for further improvements over the medium term.
“The ratings also reflect a balance between the group’s adequate liquidity and gradual earnings ramp-up at the refinery against relatively weaker credit quality following a debt restructuring as well as challenges regarding unaudited financial reporting and disclosures,” GCR said in its latest rating note.
Ratings analysts said the group’s leverage and capital structure remain key rating constraints due to the significant jump in the group’s gross debt to NGN15 trillion as of September 2025 from NGN6.9 trillion in 2023, which has constrained the leverage metrics within weak levels.
Ratings analysts said the growth in the debt level followed additional working capital loans drawn to support crude feedstock for the refinery and operations across subsidiaries.
The debt size was also affected by the adverse effect of the devaluation of the naira on its foreign currency denominated facilities of over 80% of total debt.
GCR stated that given the typically slow earnings during the commencement phase, net debt to earnings before interest tax depreciation and amortisation (EBITDA) weakened to 13x in 2024.
However, the metric significantly strengthened to 4.6x in 1H 2025 following improved earnings, while operating cash flows remained negative due to elevated working capital and finance cost pressures.
Ratings analysts also stated that the group’s interest coverage remains weak due to the higher debt level.
“With further projected earnings recovery and gradual debt reduction, net debt to EBITDA should improve to c.4x, but interest coverage and operating cash flow coverage of debt would remain constrained, due to the necessary reliance on short-term funding”, GCR said.
Dangote Industries Limited’s weak leverage assessment is balanced against the ongoing currency risk mitigation strategy, particularly through increased export sales and earnings from foreign subsidiaries, while recent exchange rate stability provides some relief.
The group’s repayment pressures are moderated by subordinated shareholder loans of NGN3.5 trillion, which is 23% of total debt.
“We have applied a negative adjustment to the sustainability assessment on account of elevated treasury and credit risks, following a stressed restructuring of a syndicated facility, although the creditors have since provided a principal moratorium and other remedial measures.
“We also remain cautious due to ongoing inconsistencies in unaudited consolidated financial reporting, particularly in the presentation and movement within the statement of cash flows”, GCR said.
Dangote Industries Limited’s earnings have shown strong recovery prospects, following the ramp up of operations at the refinery, underpinning a better EBITDA margin of 12% in H1 2025 after the compression to a review period low of 6.8% in 2024 during the commencement phase.
Prior to 2024, the group’s reported strong margins were bolstered by the cement and fertiliser segments, delivering above-peer profitability.
With the integration of refining earnings, group margins now reflect normalised levels in line with the dynamics of oil refining, which now accounts for over 70% of the group’s turnover.
“We expect further margin expansion over the next 18 months as refining capacity utilisation continues to rise.
“Additionally, steady margin enhancement is expected from the cement and fertilizer business segments (jointly accounting for 54% of group EBITDA), driven by their inherently strong margins, operational efficiencies and pricing power in key markets”.
GCR reported that Dangote Industries’ liquidity is positive to the ratings, underpinned by cash holdings of over NGN2.6 trillion as of 30 September 2025 and significant undrawn revolving credit lines.
These, alongside expected positive operating cash flows through December 2026, provide a solid liquidity buffer according to the rating note.
Ratings analysts explained that a portion of inventories, pledged against working capital facilities, also contributes to available liquidity.
Against this are liquidity uses, including modest capital spending plans and scheduled debt repayments of about NGN7 trillion, excluding the subordinated shareholder loans.
However, asset encumbrance is high, with all-asset debentures on key subsidiaries and syndicated loans secured against DIL’s stakes in three major group members.
Even with the group’s broad funding access, ratings analysts said further debt capacity may be limited by covenant restrictions and negative pledges on existing facilities.
Overall, liquidity coverage over the 15-month period to December 2026 is estimated at 1.4x, GCR said.
Ratings analysts stated that Dangote Industries competitive positioning continues to reflect the group’s strong brand value and diversified operations across multiple sectors and geographies.
The rating note explained that the group’s business interests span oil and gas refining, cement, salt and sugar refining, fertilizer production and other operations in the primary manufacturing and logistics sectors.
The group’s operational track record across these sectors have enabled it to establish strong relationships across the respective value chains, extensive distributive footprints, and a robust customer base, helping the key subsidiaries to maintain leading market positions in their segments.
Accordingly, the group has demonstrated high value accretion and size, with revenue size of NGN11.6 trillion as of June 2025 and forecast to peak at a new high of NGN23 trillion by the end of financial year 2025.
“We continue to factor in positive peer comparison primarily on the back of the group’s refining business, which is of systemic importance to the country, as oil and gas remain an important energy source.
“Given its size, the refinery could meet most of the local demand for refined oil as state-owned refineries remain non-operational.
“Although there have been tense stakeholder relationships in the past 12 months, we note the federal government’s ongoing interventions supporting quick resolutions and minimal operational disruptions.
“Over the outlook period, we expect these supports to translate into substantive financial profile improvements via supply chain and operational stability as well as business growth”.
The rating note stated that the Series 1 (Tranches A and B) and Series 2 Senior Unsecured Bonds (cumulative NGN300 billion) were issued in 2022 by Dangote Industries Funding Plc, a sponsored special purpose vehicle.
Being senior unsecured debt sponsored by DIL, GCR said the Series 1 Tranches A and B Bonds and the Series 2 Bond rank pari passu with all other senior unsecured creditors of the group.
GCR said the Evolving outlook reflects mixed expectations of a likely uplift to the ratings within the next 18 months, if earnings and cash flow improvements are sustained or exceeded expectations.
“This could support reduced recourse to external debt funding and gradual deleveraging. Proactive liquidity management and demonstrated strong financial disclosure could see the negative sustainability assessment resolved”.
Conversely, GCR said the ratings could be further downgraded if debt escalates further or earnings underperform, leading to a strain on our leverage and liquidity assumptions.
Ratings analysts said material working capital pressure could also result in increased use of short-term financing, thereby constraining free cash flow.
Further debt restructuring under conditions that GCR considers distressed and highlights weak liquidity and leverage profiles could trigger a downgrade. UBA Grows Profit by 2.3% to N538bn, Bucks Negative Earnings Trend
