FMDQ OTC Securities Exchange has listed Dangote Cement Plc’s N50 billion commercial papers. This is the biggest Commercial Paper programme so far on the Nigeria debt capital market on its platform.
Africa’s largest cement producer, recently, announced the issuance of 150 billion Series 1 and 2 Notes. The Commercial Paper comprises of N12.04 billion and N37.96 billion issuances under its 150 billion Commercial Paper Programme.
Bola Onadele Koko, Managing Director/Chief Executive, FMDQ, noted that the various efforts by FMDQ to deepen the domestic capital market is yielding results. He also expressed optimism that Dangote Cement will up the ante by listing a dollar-denominated commercial paper on its platform.
According to him:
“The listing couldn’t have been a better one because it is almost four years since I and some members of our staff travelled to Dangote Cement for the first time; then FMDQ was relatively unknown in the market and there was no CP market and we wanted to make CP market transparent and credible. In actual fact, this is now a CP market.”
Engr. Joseph Makoju, Chief Executive Officer, Dangote Cement, commended the FMDQ for organising the listing, noting that since inception, FMDQ has contributed significantly to the development of the domestic debt capital market in Nigeria.
What commercial paper means
Commercial Papers are short-term debt financing securities no longer than 270 days in tenor and consists of unsecured and discounted promissory notes issued by large corporations with good credit ratings, which can be readily traded. Due to their relatively short maturity period, commercial papers are referred to as low-risk investments, offering competitive returns to investors in compensation for the issuer’s credit risk.
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.
Dangote Cement in its 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.
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 ₦230.00 as at Friday, July 20, 2018.