By Dipo Olowookere
Globally renowned rating company, Moody’s Investors Service, has announced the completion of a periodic review of the ratings of Dangote Cement Plc and other ratings that are associated with the same analytical unit.
A statement issued by the agency and obtained by Business Post explained that the exercise was carried out through a portfolio review in which it reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.
It was disclosed that Dangote Cement’s B1 corporate family rating (CFR), one notch above Nigeria’s B2 rating, and Aaa.ng national scale rating, indicate that the Africa’s cement giant has a stronger intrinsic credit quality balanced against the meaningful linkage, with limited ability to withstand stress at the Nigerian sovereign or macroeconomic level.
Moody’s stated that the CFR also reflects the track record of demonstrated financial support from a larger and more diversified parent, Dangote Industries Limited (DIL).
It noted that Dangote Cement has a very strong credit profile, and would likely be rated higher without its linkage with Nigeria (B2 stable), in part because of its low leverage, which is significantly below its global peers.
The rating firm said the strong standalone profile also incorporates high gross margins trending above 60 percent on a Moody’s adjusted basis, high interest coverage as measured by EBIT/interest expense, and conservative funding policies with debt funding matched to the currency of cash flow generation, as well as prudent financial policies which will ensure sustenance of strong credit metrics through operating and project build cycles.
Moody’s said the ratings also factor in the relatively small-scale level of cement production when compared with global peers and a concentration of production in Nigeria.
However, Moody’s stressed that the completed review does not in any way means an announcement of a credit rating action and is also not an indication of whether or not a credit rating action is likely in the near future.
“Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement,” it said in the statement.
