GCR Ratings has reaffirmed Dangote Industries Limited’s (DIL) national scale long-term and short-term issuer ratings of AA+(NG) and A1+(NG), respectively.
The ratings agency also affirmed the national scale long-term issue rating of AA+(NG) for Dangote Industries Funding Plc’s Series 1 and Series 2 bonds.
The ratings affirmation is based on DIL’s strong earnings prospects, particularly from its new petrochemical refinery, which commenced operations in February 2024.
GCR expects significant growth in earnings from the refinery, as well as robust earnings from DIL’s other businesses.
However, the ratings are constrained by the adverse impact of naira devaluation on DIL’s profitability and financial position, given its significant foreign debt exposure.
Despite this, GCR recognizes the potential of the Dangote Group, citing the commencement of refining operations and the group’s diversified businesses.
GCR expects DIL’s business fundamentals to become increasingly focused on oil refining, given the size and potential of the refinery.
The agency also expects strong export sales potential, particularly after 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.
GCR has maintained a positive peer comparison consideration for DIL, given the importance of the refinery to the Nigerian economy.
However, the agency has lowered the extent of support applicable under this rating component, as it expects support factors to translate to substantive enhancements to DIL’s business and financial profiles over the outlook period.
In 2022, DIL raised NGN300Bn in bonds issued by its sponsored special purpose vehicle, Dangote Industries Funding Plc.
The bonds rank pari passu with all other senior unsecured creditors of the group and bear the same national scale long-term rating as DIL.
GCR has reviewed the draft trustees’ bond performance report and noted that coupons have been paid as and when due, with no breaches to any covenants and pledges in the trust deeds.
However, the report highlights DIL’s exposure to volatile energy cost dynamics and reliance on importation of raw materials.
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