Fitch affirms Dangote Industries rating at AA with a stable outlook; cites strong business profile
In a recent assessment, renowned rating agency Fitch has upheld Dangote Industries Limited’s (DIL) National Long-Term Rating at ‘AA(nga)’ with a Stable Outlook. Additionally, Fitch has reaffirmed the ‘AA(nga)’ rating for senior unsecured notes issued by Dangote Industries Funding Plc.
The affirmation of these ratings underscores DIL’s robust business profile, a credit attributed to the company’s profitable flagship entities, notably Dangote Cement Plc and Dangote Sugar Refinery Plc. These entities have solidified their market positions across the African continent, contributing significantly to the nation’s economy and growth trajectory.
Fitch’s projection hinges on DIL’s ability to strategically deleverage and enhance its overall financial standing. This entails a concerted effort to escalate production levels, resulting in substantial cash flows generated by the fertiliser and refinery segments. The augmentation of revenue streams is poised to bolster earnings stability, thus factoring into the agency’s Stable Outlook assessment.
Oil Refinery Project Nears Completion Amid Optimism, Domestic Market Challenges
Fitch anticipates the forthcoming commissioning of DIL’s oil refining venture by October 2023, with a sanguine view on potential cost overruns. Despite the pre-existing reliance of the local market on imported refined fuel, a significant proportion of the refined products is earmarked for international export.
For the oil refinery’s operational efficacy, securing a substantial share of the 450,000 barrels per day crude oil requirement from sources such as the Nigerian National Petroleum Corporation (NNPC) and global suppliers is paramount. Any limitations in domestically sourcing an adequate volume of crude oil could potentially hamper production capacity.
Cement Operations and Export Strategy Amid Evolving Market Dynamics
Fitch’s analysis indicates a projected dip in EBITDA margins for DIL’s cement operations, from 49% to 44% in 2023, attributing this decline partially to escalating commodity prices. The company’s focus remains steadfast on pursuing an ambitious export strategy. This is exemplified by its export of 1.58 million tonnes of cement and clinker to African markets.
The conglomerate boasts a consolidated cement production capacity of 51,600 kt across multiple factories spanning seven African nations. Notably, Nigeria serves as the nucleus, contributing significantly with a production volume of 17,786 KTPA in 2022. Although DIL experienced a marginal 5% decline in sales volumes in 2022, primarily within its Nigerian operations, Fitch anticipates a robust sales trajectory for 2023. This optimism is underpinned by the company’s drive to fortify its pan-African operations and capture growth opportunities across the region.
