GCR Ratings (GCR), an African rating agency, has affirmed Dangote Industries Limited’s (DIL) national long-term issuer rating at AA+(NG) and short-term issuer rating at A1+(NG).
In its latest report, GCR also affirmed the national long-term issue ratings of Dangote Industries Funding Company’s N10.5 billion Series 1 Tranche A Notes and N177.1 billion Tranche B Notes, as well as the N112.4 billion Series 2 Senior Unsecured Notes, at AA+(NG).
The rating outlook was previously changed to “Developing” from “Stable”.
Meanwhile, Fitch Ratings has downgraded Dangote Industries Limited’s national rating to “B+(nga)” and placed the rating on “Rating Watch Negative”. This is due to the national long-term rating of “AA(nga)”. Commenting on GCR’s assessment, the company said the ratings were affirmed due to the prospects of significant earnings growth as the new petrochemical refinery comes on stream, as well as robust earnings expectations from other businesses.
In its report, the rating agency slammed the impact of the naira devaluation on DIL’s financial performance, saying, “The ratings are constrained by the adverse impact of the currency devaluation on the profitability and financial position of the group, given its significant foreign debt exposure.”
Recognizing the potential of the Dangote Group, GCR added; “The commencement of the refining operations (production of diesel, naphtha, heavy fuel oil and aviation fuel) in February 2024 will strengthen the group’s business profile and complement the group’s already diversified business.
“Accordingly, we expect the group’s business fundamentals to become increasingly tilted towards oil refining, given its size as the largest refinery in Africa and Europe. We also expect strong export sales potential given the recent debut exports of refined oil to Europe.
“The non-oil businesses continue to demonstrate strong earnings-generating capacity and market leadership in their respective sectors, underpinned by the above-peer production capacities and favourable demographics.”
He added that DIL’s comparative value remains positive due to the importance of refineries to the Nigerian economy. However, it said “We have lowered the extent of support applicable under this rating component because we expect the support factors to translate to substantive enhancements to the group’s business and financial profiles over the outlook period.
“In 2022, DIL raised a cumulative N300 billion in Series 1 (Tranches A and B) and Series 2 Senior Unsecured Bonds issued by its sponsored special purpose vehicle, Dangote Industries Funding Plc. Being senior unsecured debt sponsored by DIL, 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.”
It explained that the company’s bonds have the same sovereign-level long-term ratings as those assigned by DIL, and any changes in DIL’s long-term corporate ratings would impact the rating of the bonds.
Dangote Industries said the group remains highly dependent on volatile energy cost trends and relies on imports of gypsum for cement production, raw sugar for refineries, and crude oil.
