Moody’s Assigns B2 Rating to Dangote Cement Proposed Series 2 Notes
Moody’s Investors Service has today assigned a B2 local currency rating and Aa3.ng national scale rating (NSR) to Dangote Cement Plc.’s proposed senior unsecured Series 2 notes to be issued under the existing domestic medium-term note program.
According to a statement, Moody’s said the cement company’s existing ratings, including its B2 corporate family ratings (CFR) and Aa3.ng national scale, remain unchanged.
The stable outlook is also unchanged, according to the rating note. Yesterday, Dangote cement said in a regulatory filing that the company is contemplating a second bond issue under its N300 billion issuance programme.
The agency said also said the assigned ratings are subject to review of final documentation and assume no material change in the terms and conditions of the transaction as advised to Moody’s.
“The ratings assigned to the company’s series 2 unsecured notes are aligned with the company’s B2 CFR and Aa3.ng national scale CFR.
“This reflects Moody’s view that the low secured debt in the capital structure, sustainably low group leverage and high unencumbered asset base in Nigeria provide sufficient recovery protection for senior unsecured lenders”, it said.
The issuance will have a limited impact on leverage given proceeds will be used to partly repay debt, fund ongoing capital projects and for working capital requirements.
Post the bond issuance, Moody’s expects gross debt/EBITDA to remain conservatively positioned around 1.0x for the financial year 2022.
Dangote Cement’s B2 and Aa3.ng ratings are supported by the company’s strong market presence in Nigeria and other African markets in which it operates; high gross margins of above 60% on a Moody’s-adjusted basis.
It also has low leverage of 0.8x, as measured by gross debt/EBITDA, and high-interest coverage of 10.8x, as measured by EBIT/interest expense, as of 31 December 2021; and prudent financial policies that ensure credit metrics remain strong through operating and project build cycles.READ: Nigeria’s Public Finance Starts Falling Since 2016 –Moody’s
The ratings also factor the relatively small scale level of cement production when compared to global peers, with a production of 29.3 million tons (mt) for 2021; single product exposure being cement; a concentration of production in Nigeria, high reliance on short term debt funding exposing the company to liquidity risk; and a high dividend payout policy.
Moody’s explains that the stable rating outlook reflects the expectation that the company will continue to maintain its strong market position in Nigeria and grow the business while continuing to observe conservative financial policies.
It further assumes Dangote Cement maintains sufficient liquidity to cover its short-term debt obligations and high annual dividend payments over a rolling 12 to 18 months period. #Moody’s Assigns B2 Rating to Dangote Cement Proposed Series 2 Notes
