Moody’s Places Dangote Cement’s B1 Ratings on Review for Downgrade

Moody’s Places Dangote Cement’s B1 Ratings on Review for Downgrade

Moody’s Investors Service has today placed the B1 corporate family rating, the Aa2.ng national scale corporate family rating and the B1-PD probability of default rating of Dangote Cement Plc on review for downgrade.

At the same time, Moody’s has affirmed the (P)B2 local currency rating and Aa3.ng national scale rating assigned to the N300 billion domestic medium-term note program and the B2 local currency and Aa3.ng national scale credit rating to the senior unsecured notes issued by Dangote Cement.

The review for downgrade was prompted by the increase in dollar debt in Dangote Cement Plc.’s capital structure which was not initially contemplated in the B1 rating.

Moody’s said as of 30 June 2021, the amount of dollar debt has increased to around 193 billion naira equivalent -35% of total debt from 71 billion naira equivalent in 2019.

“This exposes DCP to increased currency risks because the majority of its cash flows are generated in naira and other African currencies and the fact that all the dollar debt is short term with maturities of less than a year”, the Ratings said.

Moody’s analysts said they will therefore need to consider the higher proportion of dollar debt in the context of Moody’s foreign currency ceiling of B2 for Nigeria, instead of Moody’s local currency ceiling of Ba3.

Nigeria’s B2 foreign-currency ceiling limits the ability of a domestic corporate that has meaningful foreign currency obligations to be rated higher, which constrains a company’s rating.

The affirmation of the B2 ratings assigned to the domestic medium-term note program and senior unsecured notes reflects Moody’s position that the previous notching consideration is no longer appropriate.

The rating said this is because of the low secured debt in the capital structure, sustainably low group leverage and high unencumbered asset base in Nigeria that provide sufficient recovery protection for senior unsecured lenders

Headquartered in Lagos, Nigeria, Dangote Cement Plc is Africa’s largest cement producer. The group operates nine fully integrated cement plants, a grinding plant and two import terminals across Africa, with a combined capacity of 48.6 Mtpa and approx. 61% share of the market in Nigeria, Africa’s largest economy and population.

For the last twelve months to 30 June 2021, the company reported revenues of N1,248 billion or $3.0 billion and earnings before interest tax, depreciation and amortisation (EBITDA) of N611 billion or $1.5 billion.

Dangote Cement has the largest market capitalisation on the Nigerian Stock Exchange at N4.2 trillion or $10.3 billion as of 3 August 2021 and is majority-owned (85.75% equity stake) by Dangote Industries Limited.

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Moody’s Places Dangote Cement’s B1 Ratings on Review for Downgrade