Fitch Ratings has downgraded Dangote Industries Ltd.’s creditworthiness, citing a “significant deterioration in the group’s liquidity position” among other factors.
The National Long-Term Rating of the corporation owned by Africa’s richest man, Aliko Dangote was downgraded from ‘AA(nga)’ to ‘B+(nga)’.
The senior unsecured debt rating for Dangote Industries Funding Plc has also been lowered from ‘AA(nga)’ to ‘B+(nga)’. Fitch has placed both ratings on Rating Watch Negative (RWN).
The downgrade reflects a significant deterioration in Dangote Industries Ltd.’s liquidity position, which has been impacted by disposal proceeds and operational and financial underperformance compared to prior expectations.
Additional challenges include local currency devaluation and a lack of contracted backup funding to repay substantial debt facilities maturing on August 31, 2024.
Major currency devaluation in 2023, caused the group to record a significant FX loss of NGN2.7 trillion in 2023 as the company faces a mismatch between USD-denominated debt and domestic revenues, the ratings agency said.
The absence of audited accounts for 2023 is also viewed as a corporate governance issue.
The company’s oil refinery operated at about 50% capacity in the first half of the year, at 325,000-375,000 bpd, Fitch said, while Dangote’s fertiliser business was hindered by inadequate gas supply. Dangote’s fertilizer business faced challenges due to inadequate gas supply.
Fitch expects a further decline in Dangote’s cement margins this year, impacted by the company’s limited ability to pass on increased costs to consumers amidst soft demand.
However, refinancing or repayment of the upcoming maturities and a significant improvement in the liquidity position could lead to positive rating action/upgrade.
