Fitch Ratings has downgraded Dangote Industries Limited’s (DIL) credit rating to B+ and placed the company on ratings watch negative, citing serious concerns about its liquidity and ability to raise funds.
DIL, which operates Africa’s largest oil refinery and controls Dangote Cement, is facing significant financial challenges.
Downgrade and Key Concerns
Fitch’s downgrade reflects a considerable deterioration in DIL’s liquidity position, with the company having underperformed both operationally and financially and has been severely affected by the devaluation of Nigeria’s currency, the naira.
“We do not expect a positive rating action until the company’s liquidity position improves substantially,” said Fitch in its report.
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The devaluation of the naira in 2023, which pushed the currency to record lows, resulted in a 2.7 trillion naira ($1.74 billion) foreign exchange loss for DIL last year.
This has exacerbated the company’s financial woes, particularly due to a “mismatch” between its dollar-denominated debt and domestic revenue in naira.
Outlook for Dangote Cement
DIL’s oil refinery, set to be Africa’s largest with a capacity of 650,000 barrels per day, operated at around 50% capacity in the first half of the year, processing between 325,000 and 375,000 barrels daily.
Additionally, the company’s fertilizer business has been hampered by inadequate gas supply.
Fitch expects Dangote’s cement margins to decline further this year. The company’s ability to pass on higher costs to consumers is limited, and demand remains soft, putting additional pressure on profitability.
