Management of Dangote Cement Plc is currently weighing several options to raise debt capital. Chief Finance Officer (CFO) of the firm, Brian Egan during a conference call held today revealed that the company was considering either a Eurobond or a local debt issue. A Eurobond is one raised in a foreign currency, usually dollars.
Why is the firm considering this?
According to Egan, 70% of the firm’s N389 billion debt was owed to Dangote Industries Limited (DIL), a situation the firm no longer felt comfortable with. DIL is the holding company through which Aliko Dangote maintains a controlling stake in the cement company. Yields (interest rates) on domestic bonds are also trending lower, reducing the cost of a potential debt raise. An equity raise is not an option as that would dilute DIL’s holding, which is ultimately controlled by Aliko Dangote.
Implications of the move
The company could opt to pay down its debt to DIL, which would provide funding for other projects being pursued by the group. The Dangote Group is currently embarking on a mega refinery project, and has unveiled plans to go into dairy farming. The firm could also plough the capital towards its expansion plans. Outgoing Managing Director, Onne van Weijde has revealed that the company would still consider acquiring South Africa’s PIC cement if the price was right.
Dangote Cement Plc yesterday released its 9 month 2017 results and informed the investing community of the retirement of its Managing Director. Jospeh Makoju has also been appointed Acting Managing Director, pending when a new MD will be appointed.
Dangote shares closed at N220 in yesterday’s trading session on the Nigerian Stock Exchange, up 26.4% year to date.