Moody’s Upgrades Dangote Cement CFR Ratings from Caa1 to B3

Moody’s has upgraded Dangote Cement Plc’s credit ratings, reflecting its robust market presence and Nigeria’s improved sovereign rating.

Dangote Cement’s long-term corporate family rating (CFR) rose to B3 from Caa1, with its probability of default rating upgraded to B3-PD from Caa1-PD. Its national scale CFR also improved to A3.ng from Baa3.ng, alongside upgrades to its N300 billion senior unsecured domestic medium-term note programs and their national scale ratings to A3.ng.

The rating action underscores Dangote Cement’s strong operational ties to Nigeria’s economic, political, and regulatory environment. As Nigeria’s sovereign rating improved, Moody’s recognized the cement giant’s resilience despite economic challenges, including the naira’s sharp devaluation since 2023.

Dangote Cement generates 65% of its revenue and 82% of its EBITDA from Nigeria, exposing it to the country’s heightened risks. Yet, its vertically integrated business model and dominant market position in Nigeria and other African markets bolster its credit profile.

The company’s sales volumes reached 27.2 million tons in the 12 months to March 2025, consistent with its five-year average. Despite inflationary pressures and challenges in passing on higher raw material costs, Dangote Cement’s prudent financial policies maintain strong credit metrics.

Moody’s highlighted the company’s high gross margins, exceeding 50% on an adjusted basis, and low leverage of 1.5x gross debt/EBITDA. An interest coverage ratio of 2.8x further supports its financial stability, even with a $675 million loan to its parent, Dangote Industries Limited (DIL).

This loan, fully lent to DIL on equal terms, is expected to be repaid once DIL completes its refinancing. Moody’s anticipates Dangote Cement will sustain strong credit metrics over the next 12 to 18 months, reinforcing its stable outlook.

However, liquidity concerns persist due to the company’s reliance on short-term debt, totaling N887 billion or 37% of its debt as of March 31, 2025. Excluding the DIL loan, this proportion rises above 65%, exposing Dangote Cement to refinancing risks.

Despite N413 billion in cash reserves, negative free cash flow of N357 billion, driven by a N503 billion dividend payment in 2024, temporarily weakened liquidity. Large working capital outflows further strained its financial position, though Moody’s expects dividend flexibility to mitigate future risks.

Dangote Cement’s aggressive dividend policy, driven by DIL’s 85.75% ownership and its need to fund a now-completed oil refinery, poses governance risks. Moody’s downgraded the company’s governance issuer profile score to G-4 from G-3, citing these concerns.

The company’s single-product focus and smaller scale compared to global peers also constrain its ratings. Nevertheless, its strong cash generation and access to local funding markets, bolstered by its blue-chip status, support its financial resilience.

Moody’s stable outlook mirrors Nigeria’s, reflecting Dangote Cement’s deep ties to the country’s fiscal and regulatory landscape. The company’s ability to navigate economic challenges while maintaining a leading market position underpins its upgraded ratings.

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