Fitch downgrades Dangote credit rating on liquidity concerns
TLDR
- Fitch Ratings downgrades Dangote Industries Limited's credit rating to B+, citing liquidity concerns and fund-raising ability.
- DIL operates Africa's largest oil refinery in Nigeria, handling 650,000 barrels per day and controls Dangote Cement.
- Significant liquidity challenges and financial underperformance lead to Fitch's negative outlook on DIL.
Fitch Ratings has downgraded Dangote Industries Limited's (DIL) credit rating to B+ and placed it on ratings watch negative, citing concerns about the company's liquidity and ability to raise funds.
DIL operates what will be Africa's largest oil refinery once fully operational, a 650,000 barrel per day facility in Nigeria, and controls Dangote Cement.
"The downgrade reflects significant deterioration in the group's liquidity position," Fitch stated, adding that the group had underperformed its operational and financial expectations and was also affected by devaluations of the naira currency. "We do not expect a positive rating action until the company's liquidity position improves substantially."
Key Takeaways
Nigeria's currency devaluation in 2023, which sent the naira to record lows, resulted in a 2.7 trillion naira ($1.74 billion) foreign exchange loss for Dangote Industries Limited last year. The company faces a "mismatch" between its dollar-denominated debt and domestic revenue in naira. The company's oil refinery operated at about 50% capacity in the first half of the year, processing 325,000-375,000 barrels daily. Meanwhile, Dangote's fertilizer business was hindered by inadequate gas supply. Fitch expects Dangote's margins in cement to decline further this year due to a limited ability to pass on higher costs to consumers, while demand remains soft.
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