Economy
Aggressive Dividend Policy Exposes Dangote Cement to Liquidity Risk—Moody’s
By Dipo Olowookere
One of Africa’s leading cement makers, Dangote Cement Plc, could find itself in a liquidity crisis, a renowned credit rating agency, Moody’s Investors Service, has warned.
This warning was contained in a statement issued by the global firm on Thursday on the completion of a periodic review of the ratings of Dangote Cement Plc.
Dangote Cement is a company owned by a Nigerian, Mr Aliko Dangote, who is believed to be the richest man in Africa. He is the chairman of the company.
In the statement issued by Moody’s today, it was stressed that the aggressive dividend policy of the cement manufacturer could backfire.
For the 2019 financial year, Dangote Cement paid its shareholders a dividend of N16 per unit and a year earlier, the company paid the same amount.
Dangote Cement’s shares are traded on the Nigerian Stock Exchange (NSE) and Business Post gathered that at the close of trading today, the company’s equities were flat at N134.70 per unit.
“Dangote Cement’s high reliance on short term debt funding and aggressive dividend policy exposes the company to liquidity risk,” Moody’s said in the statement on Thursday.
However, it pointed out that the cement firm’s B1 corporate family rating (CFR) is supported by its strong market presence in Nigeria and other African markets in which it operates.
According to the rating agency, Dangote Cement’s “strong business profile benefits from its dominant market position in Nigeria and high gross margins of above 60 per cent.”
“Credit metrics remain conservative with low debt /EBITDA of around 1.0x and high-interest coverage above 5.0x, supported by prudent financial policies that ensure credit metrics remain strong through operating and project build cycles,” it added.
It stated further that the B1 rating, which is one notch above Nigeria’s B2 bond rating, considers the serviceability of local currency debt obligations and company’s strong intrinsic credit quality balanced against meaningful linkage and limited ability to withstand stress at the Nigerian sovereign or macroeconomic level.
But Moody’s emphasised in the statement that the periodic review on Dangote Cement “did not involve a rating committee.”
A look at the dividend history of Dangote Cement by Business Post in the last 10 years showed that in 2010, the company paid N4.25 (N2 interim and N2.25 final). In 2011, it paid N1.25 interim and one for 10 bonus share.
From 2012, it adopted the payment of dividend once a year and in that year, it paid N3 and then increased it to N7 in 2013 and slashed it to N6 in 2014 and then up to N8 in 2015, N8.50 in 2016, N10.50 in 2017, N16 in 2018 and N16 in 2019.
In the first six months of 2020, Dangote Cement recorded a profit after tax of N126.1 billion compared with the N119.2 billion achieved in the first six months of 2019.
Earlier this year, Dangote Cement issued N100 billion bond to investors and the sale was oversubscribed. The papers were sold under the N300 billion bond programme the company.
By Modupe Gbadeyanka
Customers of AXA Mansard in the Micro Small and Medium Scale Enterprise (MSME) sector of the economy will enjoy free exhibition stands at the Made by Nigerians Fair.
The fair is scheduled to take place on Saturday, December 7 and Sunday, December 8, 2024, at the Landmark Event Centre, Lagos.
To support small business owners, AXA Mansard is paying for stands for selected entrepreneurs to showcase their products at the fair, which attracts thousands of people.
According to the Head of Marketing at AXA Mansard Insurance Plc, Mr Olusesan Ogunyooye, this is another gesture by the company to show that MSMEs can benefit from having insurance.
He described MSMEs as the backbone of any economy, noting that they drive innovation, create jobs, and contribute significantly to national development.
“Our support for these businesses at the MBN Fair reflects the commitment to their growth and sustainability. We are passionate about helping them reach their full potential by connecting them with resources and opportunities that foster success.
“By the very nature of insurance, its benefits are in the future and they are uncertain. That has been a main source of discouragement, particularly to MSMEs. Businesses are geared to making money.
“So, when thinking about insurance, an average MSME would rather invest the money in the growth of his business first.
“The risks that businesses face are also real. There are various types of risks businesses have to contend with today; from burglary to fire, the health of employees, and so on.
“When these risks manifest, they can significantly impact a business negatively. We understand that to get MSMEs to protect themselves and the millions of jobs they create, we must help them strike a balance between growing their businesses and protecting them.
“So, we have come up with different Initiatives to help them grow their businesses. The opportunity to exhibit their products and services to thousands of visitors to the MBN Fair is another in the series of our initiatives.
“We are convinced that for insurance to grow, we need to help people and businesses see it as a strategic lever to grow their businesses, not a cost that takes away from them. If we get this right, it can’t have a massive impact on our economy because, when MSMEs thrive, the economy will prosper.
“We have experimented with this model, and we are particularly excited about the responses from our customers. It is a call for us to do more, and we are committed to Nigerian MSMEs,” Mr Ogunyooye stated.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.05 per cent gain on Friday, December 6 after the price of Afriland Properties Plc went up by 60 Kobo to settle for the day at N16.60 per share versus Thursday’s closing price of N16.00 per share.
Consequently, the market capitalisation of the bourse increased during the session by N520 billion to settle at N1.056 trillion, the same value it ended a day earlier, as the NASD Unlisted Security Index (NSI) went up by 1.5 points to wrap the session at 3,014.91 points compared with 3,013.41 points recorded in the previous session.
Business Post reports that yesterday, the price of Acorn Petroleum Plc depreciated at the close of business by 15 Kobo to trade at N1.54 per unit compared with the preceding day’s N1.69 per unit.
The volume of securities traded in the session by investors soared by 168.3 per cent on Friday to 199,577 units from 74,381 units, but the value of securities went down by 45.8 per cent to N1.4 million from the N2.7 million recorded a day earlier, and the number of deals grew by 20 per cent to six deals from the five deals executed in the preceding session.
Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.3 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.3 million units sold for N5.3 billion.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited rebounded by 0.10 per cent on Friday as almost all the key sectors closed in green when trading activities ended for the week.
The banking index appreciated by 0.73 per cent, the insurance sector gained 0.55 per cent, the energy counter improved by 0.17 per cent, and the industrial goods space jumped by 0.04 per cent, while the consumer goods sector depreciated by 0.16 per cent.
At the close of business, the All-Share Index (ASI) moved up by 96.64 points to 98,210.75 points from 98,114.11 points and the market capitalisation gained N58 billion to quote at N59.534 trillion compared with Thursday’s closing value of N59.476 trillion.
The bourse finished with 27 price advancers and 21 price decliners, representing a positive market breadth index and bullish sentiment.
Golden Guinea Breweries jumped by 9.98 per cent to N5.40, Japaul improved by 9.30 per cent to N2.35, Sunu Assurances expanded by 9.07 per cent to N5.05, Sovereign Trust Insurance rose by 7.69 per cent to 84 Kobo, and Secure Electronic Technology grew by 7.69 per cent to 70 Kobo.
On the flip side, Eterna lost 4.62 per cent to N22.70, Sterling Holdings depreciated by 4.12 per cent to N4.65, Prestige Assurance fell by 3.85 per cent to 75 Kobo, Consolidated Hallmark shrank by 3.85 per cent to N2.50, and Champion Breweries slumped by 3.50 per cent to N3.86.
Yesterday, investors bought and sold 1.0 billion equities worth N17.5 billion in 7,220 deals, in contrast to the 723.0 million equities valued at N12.8 billion transacted in 8,495 deals a day earlier, indicating a decline in the number of deals by 15.01 per cent and a surge in the trading volume and value by 43.98 per cent and 36.72 per cent, respectively.
On top of the activity chart on Friday was Wema Bank with the sale of 472.5 million stocks valued at N4.1 billion, Fidelity Bank traded 251.5 million shares worth N4.0 billion, FCMB transacted 45.0 million equities for N404.9 million, UBA sold 42.3 million shares valued at N1.4 billion, and Japaul traded 20.7 million stocks worth N46.3 million.
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