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GCR Affirms Dangote Cement Plc’s Long Term Issuer Rating of AAA(NG), Stable Outlook

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Dangote Cement - Investors King

GCR Ratings (“GCR”) has affirmed Dangote Cement Plc’s national scale long-term and short-term Issuer ratings of AAA(NG) and A1+(NG) respectively, with the Outlook accorded as Stable. Concurrently, GCR has affirmed the national scale long-term Issue rating of AAA(NG) each accorded to the existing N100bn Series 1 Senior Unsecured Bonds and N50bn Series 1 (Tranche A-C) Senior Unsecured Bonds, with the Outlook accorded as Stable.

Rated Entity / Issue Rating class Rating scale Rating Outlook / Watch
Dangote Cement Plc Long Term Issuer National AAA(NG) Stable Outlook
Short Term Issuer National A1+(NG)
N100bn Series 1 Senior Unsecured Bond Long Term Issue National AAA(NG)
N3.64bn Series 1 Tranche A Senior Unsecured Bond Long Term Issue National AAA(NG)
N10.45bn Series 1 Tranche B Senior Unsecured Bond Long Term Issue National AAA(NG)
N35.91bn Series 1 Tranche C Senior Unsecured Bond Long Term Issue National AAA(NG)

Rating Rationale

The ratings reflect Dangote Cement Plc’s (“DCP” or “the Group”) competitive position as one of Africa’s leading integrated cement manufacturers, evidenced by very strong earnings, robust cash flows and solid gearing metrics.

DCP’s ability to penetrate new markets with large-scale, modern and energy-efficient factories give it a strong competitive edge in the African market. Nevertheless, the company profile is constrained by the very high concentration to the Nigerian market, accounting for about 88% of group EBITDA and 65% of capacity at end-March 2021. In recent periods, DCP has increased focus on its export strategy within West and Central Africa, which should support the advancement of its competitive positioning across the African continent, albeit marginally offset by the higher risks in many of the countries it is targeting.

DCP’s market dominance has translated into very strong earnings and cash flows, with the EBITDA margin registering around 47% over the last five years, well above the industry average. Based on the 1Q FY21 management results to 31 March 2021, the margin registered around 53% (FY20: 46%), supported by improved cement volume sales across its key markets, and its cost control efforts with cheaper fuel mix and lower power costs. Inflationary pressure and foreign currency shortages (particularly in Nigeria) are expected to continue to weigh adversely on production costs and operating expenses, but DCP’s strong financial profile serves to moderate the impact of external shocks. The current headroom to ramp-up production volumes based on existing capacity across other market should drive strong earnings growth over the medium term, while sustaining strong margins.

At 1Q FY21, gross debt declined to N426bn following part repayment of the existing obligations. This saw annualised net debt to EBITDA registered at a low 0.4x, against 0.7x recorded at FY20, indicative of a strong credit protection. Similarly, EBITDA coverage of net interest was high at 16x in 1Q FY21, from an average of 11x between FY16 and FY20. In May 2021, DCP successfully raised N50bn from the debt capital market in Series 1 Senior Unsecured Bond Issue under its N300bn Bond Issuance Programme. Notwithstanding the additional amounts raised under the Programme, GCR expects the Group to continue to demonstrate strong financial flexibility, with net debt to EBITDA (including operating leases) expected to range between 40%-55% over the outlook period, and net interest cover projected between 10x and 15x. The Group’s robust operating cash flow is a key mitigant against concerns of higher debt. In this regard, Operating cash flow (OCF) coverage of debt registered at 166% in 1Q FY21 and should remain strong over the rating horizon.

DCP’s liquidity assessment is underpinned by expectation that cash flows will remain strong, along with N146m in cash and N153m in unutilised committed funding lines. Nevertheless, the assessment is somewhat constrained by the very high level of short-term debt, as well as the historically high dividend pay-out ratios. The uses vs. sources liquidity coverage is estimated at 1.3x over the next 12 months.

The N50bn Series 1 Senior Unsecured Bond is split into N3.64bn Tranche A, N10.45bn Tranche B and N35.91bn Tranche C, with varying interest rates and maturities in 2024, 2026 and 2028, respectively. Being senior unsecured debt of DCP, the existing N100bn Series 1 Bond and the additional N50bn Series 1 Tranche A-C Bonds rank pari passu with all other senior unsecured creditors. As such, the Bonds will bear the same national scale long term rating as that accorded to DCP. Accordingly, any change in DCP’s long term Issuer rating would impact the Bond rating.

Outlook Statement

The Stable Outlook reflects GCR’s view of DCP’s robust earnings and strong cash flows, which serves to moderate the impact of external shocks and limit recourse to additional debt.

Rating Triggers

A rating upgrade is not possible as DCP’s long-term and short-term ratings are the highest possible ratings on GCR’s rating scale. However, downward ratings pressure could arise from protracted earnings pressure or greater competition emerging from major international cement manufacturers. The aggressive dividend policy could result in materially higher than anticipated leverage and adversely impact GCR’s view of liquidity.

 

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Total Nigeria Rebounds from 2020 COVID-19 Damages, Grows Profit by 1,601 Percent to N8.1 Billion in H1 2021

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Total Exploration - Investors King

Total Nigeria Plc, a subsidiary of Total, grew revenue by 42 percent from N106.705 billion recorded in the first half (H1) of 2020 to N151.333 billion in the first half of 2021.

In the company’s unaudited financial statements for the period, the cost of sales inched higher by 33.4 percent from N94.305 billion filed in the first half of 2020 to N124.83 billion in the period under review.

Total Nigeria’s gross profit appreciated by 105.7 percent to N25.504 billion in the first half of 2021, up from N12.400 billion in the corresponding period of 2020.

The company grew operating profit to N12.526 billion in the first half from -N716.812 million achieved in the first half of 2020 during the peak of COVID-19.

Profit before minimum tax jumped by 2,358 percent from -N523.898 million in H1 2020 to N11.779 billion in the period under review.

Total Nigeria paid N3.713 billion as income tax in the first half of 2021 to take the total profit after tax to N8.1 billion, a 1,601 percent increase from -N537.188 million posted in the corresponding period.

Shareholders’ funds expanded by 17 percent to N32.821 billion from N28.151 billion in H1 2020.

Total Nigeria’s share price grew by 49 percent during the period under review to N145.00 a share, up from N97.50 a unit in the first half of 2020.

Earnings per share jumped from -N1.58 in H1 2020 to N23 in H1 2021.

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CBN Approves BUA Sugar Refinery, Dangote Sugar Refinery and Golden Sugar Company to Import Sugar into Nigeria

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Sugar - Investors King

The Central Bank of Nigeria on Monday said it has approved BUA Sugar Refinery Limited, Dangote Sugar Refinery and Golden Sugar Company to import sugar into Nigeria given their commitment to ensuring the country is sugar sufficient through their backward integration.

This was contained in a statement signed by Dr. O.S Nnaji, Director Trade and Exchange Department, CBN.

The decision is in line with the Federal Government of Nigeria’s plan to encourage and incentivize sugar refining companies in their Backward Integration Program (BIP) for local sugar production.

This will allow the three companies to sustain production while simultaneously building their backward integration in the sector.

However, the apex bank said, “Authorised Dealers shall Not open Forms M or Access foreign exchange in the Nigerian foreign exchange market for any company including the three listed above for the importation of sugar without the prior and express approval of the Central Bank of Nigeria as the Bank is charged with the mandate of monitoring the implementation of the backward integration programs of all the companies.”

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JPMorgan On A Blockchain Hiring Spree

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JPMorgan - Investors King

JPMorgan is on a hiring spree for its blockchain unit, seeking to fill positions across audit, engineering and marketing, several LinkedIn postings reveal.

The bank — which has been active in the blockchain space for several years — announced in October 2020 that it would bring all of its blockchain-related products and services under a new business unit, dubbed Onyx. Those services including Liink, a blockchain network of hundreds of financial-services firms and corporations, as well as its Coin Systems business, as per its website.

As for the job ads, JPMorgan has plastered dozens of new postings on LinkedIn, including engineering-related roles. One role for a blockchain platform software engineer is looking for someone with a background in proof of stake, Ethereum, and bitcoin and would create a “forum for innovation with the blockchain technology community that drives thought leadership around the digital architecture roadmap and strategy.”

There’s also evidence the firm wants a stronger external presence for the blockchain work being worked on at the firm.

“This individual will drive the Liink marketing strategy by developing a thorough understanding of our strategic objectives, positioning, brand voice, and offerings so that you can create consistent and engaging content across multiple touchpoints,” the ad reads. The person hired would be tasked with creating marketing strategies that “spark engagement — both internally and externally.”

The bank added that they want the person to have a sense of humor that is a touch irreverent.

JPMorgan has already made quite a number of big-ticket marketing hires for Onyx. At the beginning of the year, Ariana Gianacopoulos — formerly VP of global commercial marketing at Conde Nast — joined the firm as a marketing director.

Ray Beharry — previously a marketing executive for IBM’s cloud services division — also joined at the beginning of the year as head of marketing at Onyx, as per his LinkedIn.

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