Dangote Cement Plc announced the issuance of its N150 billion Commercial Paper Issuance Programme. The paper will be listed on the FMDQ trading platform.
In an Investor Presentation sighted by Nairametrics, the company plans to raise as much as N150 billion over a 3 year period. Dangote Cement will first raise N50 billion with an offer opening June 22, 2018, and closing June 26, 2018.
Last November Moody’s Investors Service, downgraded Dangote Cement Plc’s (DCP) corporate family rating (CFR) to B1 from Ba3. At the same time Dangote Cement ‘s probability of default rating was downgraded to B1-PD from Ba3-PD. However, the company’s national scale rating (NSR) remains unaffected at Aaa.ng.
Reports reaching Nairametrics indicates the offer was finely timed by the company as they thought it important to have this CP closed ahead of MTN’s impending debt raising. Last March, MTN has announced plans to raise $1.1 billion debt in Nigeria this year. According to Bloomberg, the new debt will be used to fund local investment and replace existing debt.
However, Nairametrics understands that Dangote Cement may have decided to issue their own debt note to avoid any potential liquidity squeeze that may occur should MTN come to the market.
Why the debt note
Dangote Cement announced a few weeks back that it wanted to raise a ₦300 billion ($833 million) local-currency bond. The company also plans to raise $500 million via the issuance of a Eurobond.
According to reports, Dangote Cement intends to spend heavily on expansion, with $350 million earmarked for capital projects this year. This includes the building of export facilities at Nigeria’s seaports to boost shipments to neighbouring West African countries.
The local debts currently being raised may, however, be used to repay some of its trade-related debts and unpaid taxes. The company has a tax liability of about
Dangote Cement Debts
Dangote Cement currently (2018 Q1 results) has a debt to equity ratio of about 37.6% made up of a total external debt of about N318 billion with a total equity of N848.7 billion only. The company, however, has a total trade payable of N280 billion.
Also included in Dangote Cement’s external debts is about N76 billion of debts obtained from its Parent Company at an interest rate of MPR Plus 1%.
Results from its financial statements for the year ended 31st December 2017 shows a 30.89% surge in revenue from ₦615 billion in 2016 to ₦805 billion in 2017. Profit before tax also grew from ₦180 billion in 2016 to ₦289 billion in 2017 representing a 60.5% increase.
Also, its Q1 2018 financial results also show 16% growth in turnover from ₦208 billion Q1 2017 to ₦242 billion Q1 2018. Profit before tax also grew by 40% from ₦77 billion in Q1 2017 to ₦108 billion in 2018.
However, the increase in revenue was largely due to an increase in cement prices as volumes produced and sold dropped. Its share price is currently trading at ₦225.00 as at Friday, June 23, 2018.