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Nigeria Corporate Analysis | Public Credit Rating
Dangote Cement Plc
Nigeria Corporate Analysis September 2017
Financial data:
(USD’m Comparative) ‡
31/12/15 31/12/16
N/USD (avg.) 193.1 253.2
N/USD (close) 197.0 305.0
Total assets 4,979.8 3,633.9
Total debt 1,265.0 838.0
Total capital 3,259.4 2,600.7
Cash & equiv. 207.1 379.3
Turnover 2,545.9 2,429.4
EBITDA 1,356.1 1,014.2
NPAT 938.8 737.1
Op. cash flow 1,430.1 956.7
Market cap. ° USD11,413.1m
Market share*
Nigeria: 65%
Cameroon: 43%
Zambia: 40%
Senegal: 25%
Ethiopia: 24%
Ghana: 23%
‡ Central Bank of Nigeria exchange rates. °As at 30/08/2017 @ N305.35/USD.
*Estimated percentage share of 2016 cement sales
in selected territories.
Rating history:
Initial rating/last rating (September 2016)
Long term: AA+(NG)
Short term: A1+(NG)
Rating outlook: Stable
Related methodologies/research:
Global master criteria for rating corporate
entities, updated February 2017
Glossary of terms/ratios, February 2016
Dangote Cement Plc (“DCP”, “Dangote
Cement” or “the Group”), Issuer rating
report, 2016
GCR contacts:
Primary Analyst
Adekemi Adebambo
Senior Credit Analyst
Committee Chairperson
Dave King
Analyst location: Lagos, Nigeria
+234 1 462 – 2545
Website: http://www.globalratings.com.ng
Summary rating rationale
The ratings take cognisance of Dangote Cement’s strong position as one of the
world’s top 20 cement companies by installed capacity. DCP has secured clinker
sufficiency in Nigeria, and as a low-cost producer, is well positioned to absorb
exogenous shocks without incurring material earnings variability.
Rapid fixed capital accumulation increased its capacity to c.46 million tonnes
per annum (“mtpa”) across ten countries by 1H FY17, from just 8mtpa in 2011.
Management plans to revise its expansion pipeline, in view of foreign currency
restrictions and unutilised capacity in Nigeria. Medium term commitments have
been limited to grinding plants in Cote d’Ivoire and Ghana, while execution of
the rest of the capex plan will depend on foreign currency availability.
While the Group has achieved a five year 20% CAGR in revenue to N615.1bn
in FY16, management relied on sharp price compression to secure strong
volumes. Combined with marked energy and distribution cost escalation,
challenges in Tanzania and Ghana, as well as a weaker Naira, the EBITDA
margin shed c.12 percentage points to 41.7% (five-year average 53.8%).
Nevertheless, EBITDA eased just 2% to N256.8bn in FY16. Repricing in the
domestic market bolstered the EBITDA margin to 49.2% in 1H FY17, while
increased productivity and the bedding down of additional international capacity
are expected to see it average at a strong 55% in the medium term. Cash generation remains sound, albeit discretionary cash flow coverage of net
debt has eased to new lows in FY16 and 1H FY17 (65%; 48%), and the short
term debt exposure was high at 71% of total debt at 1H FY17 (FY16: 59%). Net
interest cover remains adequate (FY16: 4.3x; 1H FY17: 8.5x), and is expected
to trend within range for the current ratings in the medium term.
Despite an aggressive cumulative outlay of N813.6bn on capex in the five and a
half years under review, DCP also paid out N573.2bn in distributions, which
represented 63% of cumulative net income. This has seen total borrowings more
than double from N181.2bn at FY13 to N432.6bn at 1H FY17, of which 47%
represented DIL (Naira denominated) loans.
In addition to proven shareholder support, note is also taken of established
relationships with strong funders, N120bn in trade finance credit lines, as well
as plans to access debt capital markets to reduce reliance on shareholder loans
and enhance funding flexibility and improve the debt maturity profile.
International operations do provide a natural currency hedge, albeit constrained
by the erratic performance trajectory in some regions.
While net gearing and net debt to EBITDA have risen from very conservative
levels reported prior to FY14, they remain aligned to the ratings, at 39% and
79% respectively as of 1H FY17 (FY16: 32%; 100%). Stressed scenarios
indicate that metrics are expected to remain within range over the rating horizon,
assuming a tapered capex plan (amongst other considerations).
Factors that could trigger rating action may include
Positive change: An upgrade will be dependent on the proven ability to sustain
high capacity utilisation domestically in the medium term and the successful
bedding down of international capacity enhancements translating to strong Pan-
African free cash flows and sustained conservative gearing metrics for the Group.
Negative change: Slower than anticipated economic growth in key territories,
delays in rolling out public infrastructure projects, foreign currency scarcity, the
adverse movement in foreign exchange rates, punitive regulatory changes and
competitive pressures may constrain demand and/or pricing flexibility. This could
adversely affect earnings and result in liquidity strain, increased gearing metrics
and impede debt service, placing downward pressure on the ratings.
Rating class Rating scale Rating Rating outlook Expiry date Long term National AA+(NG)
Stable August 2018
Short term National A1+(NG)
Nigeria Corporate Analysis | Public Credit Rating Page 2
Business Profile and recent developments
Dangote Cement is Africa’s leading integrated cement
group, with plants in 10 countries (FY16: eight). In
addition, four export markets are served from Nigeria. DCP
is a subsidiary of Dangote Industries Limited (“DIL”), a
diversified multinational corporate with operations
spanning building materials, packaging, logistics, real
estate, food and beverages, as well as real estate. In
addition, DIL has projects under development in
telecommunications, steel, fertilizer and oil and gas in
several African countries. DIL entered the cement market
by cement importation and trading and subsequently
acquired Benue Cement Company Plc (“BCC”) from the
Federal Government of Nigeria (“FGN”) in 2000, under a
privatisation exercise. Thereafter, DIL acquired Obajana
Cement Plc (“OCP”) from the Kogi State Government in
2002. OCP was renamed DCP in 2010 and was merged
with BCC. DCP listed on the Nigerian Stock Exchange
(“NSE”) in October 2010 and remains the most capitalised
public company, accounting for c.30% of the NSE as at 30
June 2017.
DCP has 39 subsidiaries (FY15: 35), 32 of which are
directly owned. The remainder comprises Dangote Cement
South Africa (Pty) Limited’s six subsidiaries (mainly
engaged in mining and exploration, cement production, and
investment property) and Dangote Industries (Zambia)
Limited’s limestone mining subsidiary. Dangote Cement
was previously organised into three strategic regional
groupings, namely; Nigeria, West & Central Africa
(“WCA”) and South & East Africa (“SEA”). Following a
restructuring of management during 2016, WCA and SEA
were merged to form the Pan-African segment.
DCP commenced operations in Sierra Leone in January
2017, with the launch of a 0.7mtpa import terminal and
recently commissioned a 1.5mtpa1 integrated plant in the
Republic of Congo (“Congo”). DCP has rapidly increased
its installed domestic cement capacity from 8mtpa in 2011
to 45.8mtpa by March 2017, across 13 plants. In 2016,
Dangote Cement revealed plans to enter new markets to
achieve total integrated capacity of over 75mtpa by 2020,
from 22 plants across 17 countries. Management also
indicated that the scale and timing of the rollout schedule
were provisional, and thus subject to change. Accordingly,
management plans to review its expansion pipeline (in view
of ongoing foreign currency restrictions and underutilised
capacity in Nigeria) by December 2017.
Table 1: Cement capacity
by country Type
Current capacity
(mtpa)
Operations
start date
Nigeria Integrated 29.3 2007
South Africa Integrated 3.3 2014
Tanzania Integrated 3.0 2016
Ethiopia Integrated 2.5 2015
Zambia Integrated 1.5 2015
Senegal Integrated 1.5 2014
Congo Integrated 1.5 2017
Cameroon Grinding 1.5 2015
Ghana Import terminal 1.0 2011
Sierra Leone Import terminal 0.7 2017
Total 45.8
1 Operations fully commenced in July 2017.
Nigeria remains DCP’s dominant area of operations, with a
combined production capacity of 29.25mtpa (66% of the
Group total), spread across three sites in Ibese (12mtpa),
Obajana (13.25mtpa) and Gboko (4mtpa), including 48
depots and 5,000 trucks (for cement distribution). Ibese and
Obajana were originally designed to use gas, with low-pour
fuel oil (“LPFO”) as back-up. The sustained pipeline
vandalism in Nigeria during 1H 2016 disrupted gas supply
for prolonged periods, and as a result, cement producers
(including DCP) had to rely more on LPFO, which is 2.5x
more expensive than gas (measured against the amount
used to produce a tonne of cement). As a result, industry
players witnessed overall contraction in margins during
FY16, which was somewhat moderated by a 45% price
increase effective September 2016. The bulk of the Pan-
African operations commenced within the past two fiscal
years, with some regions reporting strong sales growth in
2016. As such, DCP was able to offset top line pressures in
Nigeria with revenues from other countries.
Coal facilities have been commissioned across all the
Nigerian plants during 4Q 2016, thus eliminating the need
to use costly LPFO. Positively, DIL has begun mining coal,
and as such, DCP’s coal requirement can be considerably
met locally. Per management, purchases are priced and paid
for in Naira and cheaper compared to gas (which is priced
in USD and paid for in Naira). This enables DCP to control
its fuel supply chain and reduce foreign currency
requirements (for imported fuel). There have been three
market price increases2 in Nigeria during 1H 2017, thus,
DCP reported robust turnover growth and improved
earnings margins in 1H FY17 (albeit the margins remain
below the historical high achieved in FY13).
Management’s immediate focus is to improve margins and
cash generation.
Corporate governance and shareholding structure
DCP’s corporate governance structure complies with the
relevant requirements of the Companies and Allied Matters
Act, Securities and Exchange Commission (“SEC”) Code
of Corporate Governance for Public Companies in Nigeria,
as well as NSE regulations. There were few changes in the
size and composition of FO’s Board of directors in 2016,
owing to appointment of a new board member, and the re-
designation of an existing board member. Mrs Dorothy
2 N3000/tonne and N5,000/tonne in January and February respectively, and a further %
price increase in April 2017.
0
10
20
30
40
50
60
70
FY12 FY13 FY14 FY15 FY16 1H FY17
% Figure 1: Operating performance
Turnover growth EBITDA margin Operating margin
Nigeria Corporate Analysis | Public Credit Rating Page 3
Ufot, a seasoned lawyer, was appointed as an independent
non-executive director in April 2016, (to improve gender
diversity) while the designation of Mr. Olusegun Olusanya
was changed from non-executive director, to independent
non-executive director (after meeting the required
conditions). The Group CFO, Mr. Brian Egan was
appointed Executive Director, Finance in July 2017. He has
worked with DCP since April 2014. Board members are
from diverse backgrounds, with extensive experience in
manufacturing, engineering, marketing, law, logistics and
finance. The Board provides strategic direction and
oversight of financial, operational, corporate governance,
compliance and risk management processes. Day to day
operations are managed the Managing Director, supported
by the Executive Management team. Mr. Aliko Dangote,
an internationally renowned Nigerian industrialist and
DIL’s sole shareholder, is the Chairman of DCP.
Table 2: Corporate governance summary
Board Composition
Number of directors 14
Independent non-executives 4
Non-independent non-executives 8 (including the Chairman)
Executives 2 (the Managing Director and ED, Finance)
Tenure of non-executives Initial term of 3 years, and eligible for additional terms of three
years each, subject to satisfactory performance.
Tenure of executives
Initial term of 3 years, and eligible for additional terms of
three years each, subject to satisfactory performance and
retirement age of 65 years.
Separation of the chairman Yes
Frequency of meetings Minimum of quarterly. The Board met six times during
FY16
Board committees
Finance and General Purpose; Audit, Compliance and Risk
Management; Technical and Operations; Remuneration and
Governance and Nominations.
Internal control and
compliance Yes, reports to Audit Risk Management Committee.
Joint external auditors Akintola Williams Deloitte and Ahmed Zakari & Co.
Unqualified audits over the five-year review period.
Although DIL’s financials are not publicly available,
comfort is taken from a demonstrated financial support to
DCP, including providing intercompany loans. Such loans
historically accounted for over 50% of total debt for most
of the review period. DIL also provides non-financial
support by way of technical support, as well as marketing,
business review and consultancy services.
Table 3: DCP shareholder profile at 31 December 2016 % holding
Dangote Industries Limited 90.9
Public Investment Corporation of South Africa 1.5
Investment Corporation of Dubai 1.4
Other institutional and individual shareholders 6.2
Total 100.0
Financial reporting
Audited financial statements are prepared in accordance
with International Financial Reporting Standards (“IFRS”),
as well as the requirements of Company and Allied Matters
Act 2004 and the Financial Reporting Council of Nigeria
Act, 2011. DCP’s joint external auditors, Akintola
Williams Deloitte and Ahmed Zakari & Co., issued a clean
audit opinion on the 2016 financial statements and the
preceding four years under review.
3 Benchmark interest rate 4 MPR has been left unchanged since July 2016
Operating environment
The Nigerian economy remained subdued throughout
2016, owing to a marked reduction in crude production,
amidst low and unstable international oil prices. This has
severely affected the country’s foreign reserve levels and
fiscal planning capacity. Specifically, international crude
oil prices declined from c.USD110/bbl in June 2014 to
USD30/bbl in January 2016, and averaged USD43 in 2016
(on the back of a rebound towards year-end, which saw
prices climb to USD53/bbl in December). The negative
economic trend was exacerbated by the resurgence of
disturbances in the Niger Delta region (which affected
crude oil production outputs) and the impact of reduced
foreign exchange earnings on the economy. The significant
fall in the value of the Naira against the US dollar further
heightened uncertainty. The country’s real gross domestic
product (“GDP”) contracted by 1.5% in 2016 (compared to
2.8% and 6.2% growth recorded in 2015 and 2014
respectively), placing the country in a recession. The
economy contracted further by 0.52% in 1Q 2017 (1Q
2016: 0.67%), representing the fifth consecutive quarter of
contraction since 2016. Inflation climbed from 9.5% at
end-December 2015 to 18.6% at end-December 2016,
before easing to 16.1% at end-June 2017 (end-May: 16.3%)
Despite Central Bank of Nigeria’s (“CBN”) restrictive
policy that denied access to forex (from the official CBN
window) for 41 items and removal the exchange rate peg to
the USD in favour of a flexible exchange rate policy in June
2016, the Naira remained under pressure, with the
inadequate forex supply from the official CBN window
driving much weaker exchange rates in the parallel market.
The NGN/USD exchange rate rose above N500/USD in
February 2017, remaining above N450/USD till mid-
March 2017. CBN established the Investors & Exporters
FX window in April 2017, to boost liquidity in the FX
market and to ensure timely execution and settlement for
eligible transactions. The recent intervention has increased
the dollar liquidity in the market with exchange rates
remaining below N400/USD since end-April. At its last
sitting in July 2017, the Monetary Policy Committee left
the monetary policy rate3 (“MPR”) unchanged at 14%4,
while the cash reserve ratio and liquidity ratio for banks
were also maintained at 22.5% and 30% respectively, in
line with efforts to combat inflation and maintain price
stability.
Given the current macroeconomic challenges, prospects for
growth remain mixed over the short to medium term. Both
the International Monetary Fund and World Bank expect
the economy to record a modest rebound in 2017 (of 0.8%
and 1.2% respectively). To stabilise the economy, the FGN
has maintained an expansionary policy for the 2017 fiscal
year, with a budget of N7.44trn5 (2016: N6.08tn, 2015:
N4.49tn). The budget is based on an oil benchmark of
USD44.5/bbl and a daily production output of 2.2mb/d,
inter alia. The Ministry of Budget and National Planning
5 Signed into law in June 2017.
Nigeria Corporate Analysis | Public Credit Rating Page 4
has recently released the Economic Recovery and Growth
Plan (“ERGP”) 2017-2020. Based on the ERGP, the FGN
anticipates that accelerated infrastructural spend and the
diversification of earnings would drive an increase in
economic activities, thereby, resulting in an overall GDP
growth in 2017.
Industry overview - Nigeria
Nigeria, DCP’s main market, has the most significant
potential in Africa, with its abundant limestone reserves,
large population (over 180m) and huge infrastructural
deficit. Per capita consumption is low at around 125kg
suggesting significant potential for further growth. The
significant decline in crude oil prices and shortfall in
production placed material strain on government revenue
and expenditure. Government expenditure is a critical
growth driver in the construction sector. In addition, delay
in passing the national budget, high inflation, reduced
consumer spending, higher lending rates and inadequate
funding all contributed to a 6% contraction in the
construction sector in 2016 (2015: 4.4% growth).
According to industry sources, overall domestic demand
for cement of c.22.6mt was flat (a departure from the five-
year CAGR of c.9% to 2015).
Table 4: Competitive position - Dangote Cement vs Lafarge Africa Plc
FY16 (N'm) DCP LAP
Revenue 615,103 219,714
EBITDA 256,778 25,804
Op. Income 182,028 9,927
Net interest income/(expense) (42,719) (11,829)
NPAT 186,624 16,899
Equity 793,200 247,389
Total debt 372,775 127,530
Cash and equiv. 115,693 19,265
Current assets 303,164 98,344
Total assets 1,523,763 500,927
Current liabilities 512,247 175,987
Cement Capacity in Nigeria 29.3mtpa 11mtpa
Total Cement Capacity 45.8mtpa 14.6mtpa
Ratios (%) Market share (%) 65.0 25.0
Revenue growth 25.1 (17.8)
EBITDA margin 41.7 11.7
Operating margin 29.6 4.5
Net gearing 32.4 43.8
Net debt :EBITDA 100.1 419.6
DCP and Lafarge Africa Plc6 (“LAP”), controlled 90% of
industry volumes and revenues in 2016. BUA Group
accounted for around 9% of the industry while a few small
players including Ibeto Group accounted for the balance.
The price cut (of N6,000/tonne) in September 2015, drove
volume growth for DCP, in the 11 months that followed
Having sold about 8.8mt of cement in 1H FY16, DCP
reported a 39% YoY volume growth, driven by small-scale
building projects. Also contributing to the volume growth
was increased marketing activities. DCP recruited
additional sales and marketing staff, focused on efforts in
activating several outlets, and invested significantly in
logistics and distribution. In this regard, GCR noted a 38%
increase in selling and distribution costs. The cement
industry is highly capital intensive, posing a significant
barrier to entry. The anticipated recovery in the Nigerian
economy during 2H 2017 bodes positively for the cement
sector, albeit that the impact will likely be more evident
6 Inclusive of revenues of subsidiaries (AshakaCem and UniCem)
during 1Q 2018. Prospects are high for the Nigerian
market, as the FGN committed to investment in
infrastructure and housing, with the capital spending
retained at around 31% of 2017 budget (2016: 31%; 2015:
12%).
Competitive position – Rest of Africa
According to African Economic Outlook Report 2017,
Africa’s real GDP growth slowed to 2.2% in 2016, from
3.4% in 2015. This was mainly attributed to due to the
persistent decline in commodity prices and weak global
economic growth. Growth is projected to tick up to 3.4% in
2017, albeit dependent on sustained recovery in commodity
prices, strengthening of global economy and
macroeconomic reforms within the respective domestic
economies. As such, the recovery will likely be fragile with
most of the uplift anticipated from Nigeria and Angola.
Significant opportunities abound for African producers to
expand, replace imports, especially in West Africa, much
of which lacks limestone. Cement demand will be driven
by large population, rapid urbanisation (which requires
housing and infrastructure) and higher disposable incomes
(due to an expanding middle-income class and a growing
work force).
During 2H 2016, DCP began exporting cement from
Nigeria to Ghana, reducing the need for Asian imports and
generating foreign currency sales. Out of total sales of
1.1mt it sold in Ghana, 0.2mt were produced in Nigeria.
The Group also exported cement to Togo and Niger,
bringing total exports to 366kt in 2016. Table 6 gives an
overview of DCP’s leading markets outside Nigeria,
including population, per capita consumption, GDP
growth, DCP’s main competitors, and respective market
share.
Source: United Nations Population Division, Word Bank estimates, Global Cement Report
estimates and DCP estimates.
*Based on the first seven months of operations.
Earnings diversification
Nigeria
A combination of factors including tough economic
conditions, price increase and fuel shortages slowed down
sales during 4Q FY16. This notwithstanding, total sales
volumes increased by 14% to 15.1mt (including exports of
366kt) in FY16, albeit that some margin was lost (due to
elevated production costs exacerbated by the devaluation of
the Naira). Overall, Nigeria contributed 64% of DCP’s
Table 5: Cement – DCP’s
African markets Ghana Senegal Cameroon Ethiopia Zambia Tanzania
Population (m) 28 15 24 101 16 52
Per capita utilisation (kg) 211 102 83 61 95 65
2016 GDP (%Δ) 3.6 6.6 4.5 7.6 3.3 7.0
Sales volumes, FY16 (mt) 1.1 1.0 2.5 2.0 0.8 0.6
DCP market share (%) 23 25 43 24 40 26
DCP main
Competitors
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Eth
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Nigeria Corporate Analysis | Public Credit Rating Page 5
production volume and 69% of its revenue in FY16 (FY15:
70% and 79%). The impact of the 45% price increase in
September 2016 buoyed EBITDA margin in 4Q FY16. As
such, Nigeria’s overall EBITDA contribution remained
strong at 90% (FY15: 91%). The three price increases in
Nigeria (during 1H FY17) and improved operating
efficiencies, moderated the impact of higher cost of sales
and have led to a rallying of margins as at June 2017.
Table 6: Geographic
diversification (N'm)
2015 2016
Nigeria Pan Africa Nigeria Pan Africa
Revenue 389,215 103,477 426,129 195,028
EBITDA 247,479 25,070 241,969 26,456
Operating profit 203,766 13,330 194,856 (1,928)
Net finance cost* 26,869 (27,514) 190,666 40,055
Net result 223,239 (23,594) 379,331 (38,520)
Total assets 1,124,475 430,310 1,530,075 758,042
Capex 69,300 87,792 59,271 59,570
Capacity (mtpa) 29.3 14.3 29.3 14.3
Sales vol. (mt) 13.3 5.6 15.1 8.6
EBITDA margin (%) 63.6 24.2 56.8 13.6
Op. margin (%) 52.4 12.9 45.7 (1.0)
Asset turnover (x) 0.4 0.3 0.3 0.3
Note: numbers are inclusive of intercompany balances.
*Inclusive of foreign exchange gains.
Pan-African operations
Supported by production ramp up at established factories
and a maiden contribution from Tanzania, cement volumes
increased by 54% to 8.6mt. Accordingly, Pan-African
revenue almost doubled to N195bn in FY16, representing
31% of the Group’s turnover (FY15: 21%) and 10% of
EBITDA (FY15: 9%). Operating performance was mixed
in the Pan-African region, with strong margins reported in
Senegal and Ethiopia while diesel costs weighed in heavily
on margins in Tanzania. The lack of reliable gas supply had
forced DCP to use diesel generators due to inadequate
electricity (from grid) to keep the plant running. Ghana also
incurred high haulage costs as imports are done via road
transportation. In addition, Sierra-Leone and Congo
incurred start-up costs and are yet to make positive earnings
contributions. Combined these factors resulted in a sharp
contraction in earnings margins. Overall, the Pan-African
region reported an operating loss of N1.9bn in FY16,
compared with a N13.3bn operating profit in FY15.
Management expects a recovery in earnings in FY17 which
will be underpinned by production ramp-up at the 3mtpa
Tanzania plant, increased volumes across other countries
and initial contributions from Sierra-Leone and Congo.
DCP has reached an agreement on gas supply and expects
gas turbines to be in place in December. Before end-2017,
management will begin the construction of a permanent
coal/gas power station. Estimated cost of the project is
USD90m.
Financial performance
A five-year financial synopsis and the unaudited interim
results to June 2017 are appended to this report, while
commentary follows.
The Group’s strong top line performance (notably a 20%
five-year CAGR) was underpinned by rapid fixed capital
accumulation and dominance of the domestic market,
7 Pan-African operations accounted for 41% of DCP’s cement volumes and 30% of turnover
in 1H FY17
which enabled DCP to absorb sharp price compression to
secure volume traction. Specifically, DCP’s revenue rose
by 25% to N615.1bn in FY16 (91% of forecast), on the
back of a similar increase in sales volumes to 23.6mt. The
combined impact of lower selling prices in Nigeria up to
August 2016 and a 69% increase in energy costs to
N112.3bn (which absorbed 18% of revenue, from 14% in
FY15), saw the normalised gross margin reduce from
66.7% in FY15 to a review period low of 55.7% in FY16.
Positively, there has been increased stability in gas supply
since September 2016, while DCP has launched coal
facilities at all domestic plants. The Group also had to
contend with a weaker Naira, as well as various challenges
in Tanzania and Ghana, which compounded procurement
costs and added pressure to the gross margin.
Table 7: Income statement
(N'm) FY15 FY16 1H FY16 1H F17 YoY %Δ
Sales volume (mt) 18.9 23.6 13.0 11.5 (11.3)
Revenue 491,725 615,103 292,191 412,678 41.2
Gross Profit 289,917 291,287 153,004 235,127 53.7
EBITDA 261,931 256,778 132,259 203,005 53.5
Depreciation (54,626) (74,750) (34,472) (40,177) 16.5
Op. Profit 207,305 182,028 97,787 162,828 66.5
Net interest* (31,778) (42,719) (15,878) (19,127) 20.5
Forex mvmt. 12,250 41,155 42,726 11,210 (73.8)
Other op. income† 517 465 255 670 162.7
NPBT 188,294 180,929 124,890 155,581 24.6
Gross margin (%) 59.0 47.4 52.4 57.0 -
Norm. gross margin (%)# 66.7 55.7 60.0 63.8 -
EBITDA margin (%) 53.3 41.7 45.3 49.2 -
Op. margin (%) 42.2 29.6 33.5 39.5 -
Net int. cover (x) 6.5 4.3 6.2 8.5 -
*Excludes amounts included in cost of qualifying assets and forex gain/losses †Includes insurance claim, adjustments to recognise concessionary interest rate of
government loam per IFRS requirements and provision for defined benefit obligation #Excludes plant depreciation
Business expansion saw employee count rise by almost
2,000 to 16,272 in FY16. Accordingly, staff costs rose by
23%, which equated to a higher 4% of Group turnover
(FY15: 3%). Selling and distribution costs increased were
up 38% in FY16 (13% of revenue, from 11% previously),
due to higher sales and related distribution costs in Nigeria,
as well increased activity levels for Pan-African operations.
Most of the pressure emanated from the gross margin line
and accordingly, the EBITDA margin shed 11.5 percentage
points to 41.7% (forecast: 43.3%; five-year average:
53.8%). This notwithstanding EBITDA eased by just 2% to
N256.8bn. Depreciation rose sharply by N20bn, following
the recognition of a full year’s charge on the four plants
commissioned in 2015 (Ethiopia, Zambia, Cameroon and
Tanzania). Operating profit thus fell by 12% to N182bn in
FY16.
Based on adverse economic conditions and delay in passing
the national budget, cement demand was sluggish in
Nigeria during 1H FY17. According to the Group’s
estimates, total market demand in Nigeria was 10.2mt
during 1H FY17. Consequently, DCP domestic cement
volumes reduced 22% YoY to 6.9mt in 1H FY17, but rose
by 13% YoY for Pan-African operations7, translating to a
combined c.12% decline for the Group. This was offset by
price increases in Nigeria, which supported a 41% YoY
increase in the Group’s revenue to N412.7bn in 1H FY17.
Nigeria Corporate Analysis | Public Credit Rating Page 6
Higher Pan-African volumes and the foreign exchange
translation impact led to 28% increase in the Group’s
manufacturing costs (Average exchange rate during 1H
FY16 was N212/USD while it was N308/USD in 1H
FY17). Despite lower production volumes in Nigeria,
manufacturing costs also went up due to the increase in the
price of gas, higher landed cost of imported coal. DCP’s
fuel mix improved in 1H FY17, as locally-mined coal
became available for use across Nigerian plants and
imports were reduced.
The enhanced revenue and firmer gross margin combined
to see EBITDA rise 54% YoY to N203bn at 1H FY17 at a
stronger 49.2% margin. Marketing and administration
expenses rose further by 29% as business operations
expanded. An additional 1,000 trucks were added to DCP’s
Pan-African truck fleet during 1H FY17. As such haulage
costs and depreciation costs increased 39% YoY. This
notwithstanding, the higher EBITDA margin still
supported a 10 percentage-point correction in the operating
margin to 39.5%, leading to a significant rise in operating
profit to N162.8bn (1H FY15: N97.8bn).
DCP is budgeting for revenue growth of 11% to USD2.6bn
(c.N1trn) in FY17 and a further 26% growth in FY18. This
will be underpinned by increased exports from Nigeria to
Ghana, production ramp-up in Tanzania and contributions
from new capacity in Sierra Leone and the Congo Republic.
In GCR’s view, the projected revenue growth appears
reasonable, given that price correction is expected to be
sustained into 2H FY17, and in view of significant
headroom to ramp-up production volumes across its plants
(given the moderate plant capacity utilisation of c.55%).
Management expects full year earnings to be stronger, even
if Nigeria volumes remain same or lower than FY16.
Positively, Nigeria earnings are typically firmer in the last
quarter of the year, due to increased construction activities
in the dry season. Per Group forecasts, the EBITDA margin
is projected at 51.1% in FY17 averaging c.55% through to
FY21. Over the past 5-years, DCP has achieved an average
EBITDA margin of 53.8%, with a peak of 59% in FY13. In
GCR’s opinion, benefits accruing from operating
efficiencies and cheaper fuel mix in Nigeria (arising from
increased utilisation of coal), should sustain EBITDA
margins above the FY16 low in the medium term.
The gross finance charge increased 36% to N45.4bn in
FY16, mainly due to cessation of interest capitalisation on
newly commissioned plants and the higher debt. The
average interest rate on DCP’s credit facilities remained at
13% in FY16, while total debt had risen by N117.2bn to
N372.8bn at FY16. Overall, the net interest charge rose by
34% to N42.7bn in FY16. Although net interest expenses
increased by 21% during 1H FY17, net interest cover
firmed up to 8.5x (1H FY16: 6.2x) and was bolstered by the
stronger operating profit. During 1H FY16, the value of the
Naira depreciated by 45%, resulting in significant exchange
gains in FY16, which resulted from translation of foreign
currency denominated assets into the reporting currency
(Naira). Net foreign exchange gains rose to N41.2bn
(FY15: N12.3bn), before moderating in 1H FY17, as the
currently stabilised somewhat from April 2017.
After accounting for other income, pre-tax earnings fell by
4% to N180.9bn in FY16, before rising 25% YoY to
N155.6bn in 1H F17, suggesting stronger earnings for
FY17. The effective tax rate for the Nigerian operations
was 2%, representing a mix of non-taxable profits from
cement produced on lines still under Pioneer Tax
Exemption (Ibese lines 3&4 and Obajana line 4), the
application of the Commencement Rule that resulted in
increased tax rates for lines out of Pioneer status, and tax
exemption on the profits of export sales. The Group
reported a net N5.7bn tax credit in FY16 which resulted
mainly from deferred tax credits for Pan-African
operations. As a result, NPAT increased 3% to N186.6bn
but at a lower 30% net margin (FY15: 37%).
Cash flows
Cash generation has been very strong and has trended in
line with EBITDA, barring adjustments for fair value and
unrealised foreign currency movements. DCP reflects
significant working capital movements, being in ramp-up
phase across several territories. This is largely attributed to
substantial prepayments for diesel, LPFO, coal, as well as
deposits for imports (inter alia), with the accumulation and
unwinding of creditors to fund trading assets adding to
variability. Management also stocks critical machine spares
to minimise downtime, as well as consumables that will
cover up to two years’ operations. Spare parts have
historically accounted for over 35% of inventory.
Table 8: Working capital (N'm) FY15 FY16 1H FY17
Inventories 53,118 82,903 84,154
Trade receivables 6,234 15,987 12,997
Trade payables (44,044) (83,164) (81,005)
Operating working capital 15,308.0 15,726.0 16,146.0
Other receivables 6,165 36,698 93,386
Prepayments 59,671 51,883 60,298
Other payables and accruals (108,090) (204,109) (213,443)
Current tax payable (1,289) (4,674) (3,868)
Non-operating working capital (43,543) (120,202) (63,627)
Net working capital asset/(liability) (28,235) (104,476) (47,481)
Net working capital movement 26,356 35,857 (49,934)
Sales are mainly made on cash basis prior to dispatch of
goods, with a few large wholesalers allowed up to 15 days’
credit if a bank guarantee is in place. Thus, trade debtors
have little impact on working capital movements,
accounting for less than 4% of revenue over the review
period. In comparison, the average credit period on DCP’s
trade payables in FY16 was 94 days (FY15: 80 days). DCP
enjoys strong relationships with creditors, which saw its
average credit period extended to 94 days in FY16 (FY15:
80 days (five-year average: 73 days).
DCP reported two sizeable successive working capital
releases (FY16: N35.9bn), as the increase in creditors more
than offset the movement in inventory and debtors. During
1H FY17, DCP registered a N57.8bn increase in related
party receivables, following the commissioning of the
Congolese and Sierra Leone operations, which drove a
c.N50bn working capital absorption overall. After
Nigeria Corporate Analysis | Public Credit Rating Page 7
accounting for higher interest charges and tax payments,
the Group’s operating cash flows reduced by 12% to
N242.2bn in FY16. Although, interest and tax payments
rose by 49% YoY in 1H FY17, operating cashflows
increased 17% YoY to N118bn at 1H FY17, despite the
impact of the working capital absorption. (On an
annualised basis, operating cashflows declined by 3%).
Robust discretionary cash flows have funded cumulative
dividend payments of N573.2bn over the review period,
translating to 63% of cumulative net income. The dividend
pay-out ratio has hovered around 75% since FY15. This is
somewhat at odds with the aggressive expansion
programme, which saw DCP spend a cumulative N813.6bn
from FY12-1H FY17. While no quantified guidance is
given as regards DCP’s dividend policy, management
indicated that the Group’s dividend cover is set after taking
into account operational and expansionary capital
expenditure requirements. Capex spend was more
moderate at N40.2bn in 1H FY17, in line with
management’s plans to slow down spend in the medium
term. Overall, net debt increased by N13.1bn at FY16 and
further by N67.7bn in 1H FY17. The latter was driven by a
transient elevation in working capital requirements and
should correct by FY17.
Funding and gearing profile
Underpinned by substantial capacity expansion and
geographical diversification, DCP’s asset base almost
trebled from N656.5bn at FY12 to N1.6trn at 1H F1Y17.
DCP evidences a capital-intensive balance sheet, with
property, plant and equipment having averaged 80% of
total assets over the review period. Inventories have
accounted for a stable 5% of the asset base between FY15
and 1H FY17 while debtors and prepayments increased to
10% of total assets at 1H FY17 (FY16: 7%), as activity
levels increased across newly commissioned plants. Cash
balances increased significantly to N115.7bn in FY16
(FY15: N40.8bn), supported by higher sales and impact of
translation of foreign currency. As such, cash increased
from 4% of total assets at FY15 to 8% at FY16. The
remainder comprise investments which constitute a small
proportion (less than 5%) of the asset base.
Operations remain well-capitalised, with tangible equity
having more than doubled (despite the high dividend
payout ratio) from N402.8bn at FY12 to N817.4bn at 1H
FY17, and averaging at least 55% of DCP’s funding. The
large distributions to shareholders are considered as an
indirect claw back of capital invested (both through equity
and loans) into the business. While it is incongruous with
DCP’s expansion plans, it does imply that shareholders will
be willing to extend existing loans or plough in additional
debt when required to sustain robust credit protection
metrics. The N67.7bn net debt increase saw the proportion
of equity funding decreased to 50% in 1H FY17 (FY16:
52%), with the remainder of liabilities almost evenly split
between debt and creditors. The bulk of term loans were
provided by DIL, with maturities between 2017 and 2019.
The outstanding balance on the parent company loans stood
at N205bn at 1H FY17 (FY16: N206.1bn), of which
N130bn is due for repayment by December 2017.
During 1H FY17, DCP made a further draw down on
existing trade finance lines to meet increased working
capital requirements, as funds had to be set aside for the
large dividend payment made during the period. As such,
short term debt accounted for a high 71% of total debt at
1H FY17 (FY16: 59%; FY15: 19%). Of the loans, N30bn
is subordinated, which puts a modest portion of the DIL’s
claims well behind those of external funders. While GCR
is concerned about the high short-term debt exposure at
1H FY17, the significant portion of maturing term loans
pertain to DIL loans, with no undue pressure to refinance.
To increase financial flexibility, DCP intends to refinance
the payment of intercompany loans with a Naira bond
issuance, albeit dependent on favourable market
conditions.
Table 9: Funding
lines Loan type
Interest
rate (%)
FY15
(N'bn)
FY16
(N'bn)
1H FY17
(N'bn) Maturity
DIL (subord.) LT loan 15 30.0 30.0 30.0 2019
DIL LT loan 15 146.2 176.1 175.0 2017; 2019
Bulk Comm. Ltd. USD: WC 6 0.7 9.8 10.6 on demand
Power loan Term loan 7 14.7 12.5 11.4 2021
Overdrafts Loan 23-27 2.9 6.3 6.4 on demand
ST bank loans USD 6 19.2 47.6 116.8 2017
LT bank loans CFA 8.5 0.0 24.0 24.0 2021
Nedbank /Standard
Bank Rand 10 31.4 50.2 50.2 2022
Interest payable n.a n.a 10.6 16.3 8.2 n.a
Total 255.6 372.8 432.6
*LT is long term, ST is short term, WC is working capital.
The Group has a mix of Naira and foreign currency
denominated loans across seven major banks. Besides the
current facility limit of N320bn for DIL loans and USD33m
on a related party loan (Bulk Commodities), DCP has trade
finance facilities of USD322m (which can renewed as
required), and an equivalent of c.USD250m across other
currencies for the subsidiaries. The Power Intervention loan
is a N24.5bn government loan, obtained in 2011 under the
aegis of CBN’s Power & Aviation Intervention Fund,
through the Bank of Industry. Nigeria’s bank loans are
secured by a debenture on all fixed and floating assets of
DCP. The loan from Nedbank/Standard is a project finance
loan obtained in 2010 for the South African joint venture
with Sephaku, and is secured with subsidiary assets. The
loan has a four-year tenor, with bullet repayment on
maturity in May 2017. The remainder of USD denominated
loans pertain to international trade finance facilities and
letters of credit and are usually paid quarterly. The N24bn
debt is a CFA48.75 subsidiary loan obtained in July 2016
to refinance existing debt for the Cameroon business, and
is secured with pledged assets.
DCP faces foreign exchange and repricing risks in respect
of its foreign loan loans, especially when the reporting
currencies weaken against the USD. The exposure is
heightened by regulatory uncertainty with regarding the
floating of the Naira, in particular. Management has
indicated that DCP receives foreign currency from export
proceeds, international businesses, and also sources
through bids in the interbank market. This does provide a
natural hedge, but is currently constrained by the erratic
performance trajectory of some offshore operations and the
Nigeria Corporate Analysis | Public Credit Rating Page 8
modest proportion of hard currency earnings, which stood
at 6% of the Group’s EBITDA at 1H FY17 (FY16: 5%).
DCP had budgeted for higher debt levels in line with earlier
expansion plans and related working capital requirements.
Total debt edged significantly higher to N372.8bn at FY16,
and reached a new peak of N432.6bn at 1H FY17. With the
expansion plans, scaled down somewhat, gross debt was
well within targets. Despite the larger debt, substantial cash
balances kept gearing metrics moderate at FY16 and 1H
FY17. Net gearing increased from 34% at FY15 to 39% at
1H FY17 (FY16: 32%). Stronger earnings at 1H FY17, saw
net debt to EBITDA improve to 79%, from 100% at FY16
(FY15: 82%). From a high of 218% in FY13, discretionary
cash flow coverage of net debt declined to 65% in FY16
(FY15: 103%), and registered at a low of 48% in 1H FY17.
This does imply moderate strain on the Group’s debt
service despite the conservative gearing metrics, and will
be monitored closely. Having fallen off to new lows of 4x
and 4.3x in FY16 (FY15: 6.2x and 6.5x), gross interest
cover and net interest cover picked up to 6.7x and 8.5x at
1H FY17, and are expected to remain within range for the
current ratings over the medium term.
Table 10: Funding profile
(N’m) FY15 FY16
Forecast
FY16* 1H FY17
Short term debt 47,275 220,300 103,090 305,446
Long term debt 208,329 152,475 369,355 127,123
Total debt 255,604 372,775 472,445 432,569
Cash (40,792) (115,693) (111,325) (110,573)
Net Debt 214,812 257,082 361,120 321,996
Equity 642,110 793,200 944,585 817,370
Net debt: equity (%) 33.5 32.4 38.2 39.4
Total debt: equity (%) 39.8 47.0 50.0 52.9
Net debt: EBITDA (%) 82.0 100.1 102.6 79.3
Total debt: EBITDA (%) 97.6 145.2 134.3 106.5
Cash: ST debt (x) 0.9 0.5 1.1 0.4
*USD forecasts were provided. The balances were translated at CBN closing exchange rate
of N305/USD
GCR has performed a number of stresses to test the impact
on the Group’s earnings if projected growth forecasts, or
earnings margins do not materialise. Severe stressors were
applied to determine if debt serviceability ratios and
earning based gearing metrics will still sustain ratings
within the current rating band over the rating horizon,
barring unforeseen exogenous factors. At all the EBITDA
margin levels tested (30%, 40% and 50%), DCP should be
able to generate strong free cash flows and debt service
metrics aligned to the ratings. The stress tests assumed that
forecast debt levels will be 40% higher (in each year) at an
assumed interest rate of 20% for the incremental debt
(average interest rate on DCP’s facilities is 13% in FY16).
The net finance costs utilised for the stress tests were
almost double the actual forecast levels for FY17 and
FY18. At a 40% EBITDA margin keeping other parameters
(of higher debt and interest constant), net debt to EBITDA
will remain below 1.8x, and interest cover will be above 3x.
If EBITDA margin is sustained at 50% over the forecast
period, net debt to EBITDA will remain below 1.5x and
interest coverage will remain above 4x. EBITDA margins
will have to decline to 30%, under the stressed scenarios
for net debt to EBITDA to rise above 200%, with interest
cover still remaining above 2x.
Outlook and rating rationale
DCP’s strategic vision is to remain Africa’s leading
producer of cement and aims to be the leader in quality,
costs and services across all operations, with a market share
of at least 30% and a first or second position in each market.
GCR has been provided with revised USD-based five-year
forecasts for the period spanning FY17 to FY21, to reflect
a revision of expansion plans. Double-digit revenue growth
will be underpinned by increased exports from Nigeria to
Ghana, production ramp-up in Tanzania and contributions
from new capacities in Sierra-Leone and Congo. According
to management, earnings will be enhanced by benefits of
higher pricing, cheaper fuel mix and sustained operating
efficiencies. EBITDA margin is expected to reach 51.1% in
FY17 (1H FY17: 49.2%) and improve annually, averaging
54.7% in the medium term.
Operating profit is expected to be USD1.1bn in FY17, and
should rise by 39% in FY18. Operating margin is forecast
to increase to 41.2% in FY17 (1H F17: 39.5%) before rising
to 45.5% in FY18. In line with the higher quantum of debt,
net finance charges are expected to rise to USD131.6m in
FY17 and by 19% in FY18. Supported by anticipated
robust earnings, net interest cover is forecast to remain firm
at 8.2x in FY17 (in line with 1H FY17) and should edge
higher to 9.6x in FY18. Overall, DCP anticipates NPBT to
grow at a CAGR of 27% by FY21, from USD946.9m in
FY17. Budgets indicate that operating cash flows will be
USD1bn in FY16 and rise by 55% in FY18, due to
anticipated robust earnings. Management has significantly
scaled down its earlier capex plans. Over the medium term,
DCP intends to establish two grinding plants (in Cote
d’Ivoire and Ghana). Capex is projected at USD1.1bn over
the medium term and will be financed through internal cash
generation and debt. In the short term, DCP will pursue
capex improvements, rather than building and expansion.
FY17 capex pertains largely to the Tanzania power plant,
purchase of trucks, settlement of outstanding balances to
Sinoma on the various projects and as well as operational
capex in Nigeria, Zambia and Senegal.
Gross debt is budgeted to reach USD1.4bn in FY17, before
rising to USD1.8bn in FY18, corresponding to level of the
capex. Management remains committed to a strong balance
sheet with low leverage, and intends to maintain debt to
EBITDA below 1.5x over the forecast period. Net gearing
is expected to peak to 56% at FY17 (FY16: 38%) and
should decline to 45% by FY19. Net debt to EBITDA is
0
10
20
30
40
50
60
0
1,000
2,000
3,000
4,000
5,000
6,000
FY17 FY18 FY19 FY20 FY21
%USD'm Figure 2: Medium term operating forecasts
Revenue EBITDA Op. profit Op. margin (RHS)
Nigeria Corporate Analysis | Public Credit Rating Page 9
anticipated to rise to 91% in FY17. Gearing metrics as at
1H FY17 were in line with forecasts. Operating cash flow
coverage of total debt is forecast to be 71% and 86% in
FY17 and FY18 respectively.
Sub-Saharan Africa (“SSA”) significantly lags global
average per-capita cement consumption, although
opportunities in each country are limited by individual per
capita income, poverty levels, state indebtedness (and
ability to borrow), fiscal discipline, and GDP growth (inter
alia). Forecast profitability margins are largely in line with
historical strong margins and appear achievable, albeit
dependent on an effective fuel strategy, improved
economic conditions across key geographies, continued
focus on efficiency and sufficient ramp up in exports (to
allow for increased capacity utilisation).
Management has indicated that DCP is focused on
sustaining efficiency initiatives including better
coordination of clinker supply ships to avoid shortages or
oversupply, optimising local logistics for raw material
supplies and improvements in the organisation and
throughput of trucks collecting cement. The impact of
higher prices and fuel savings in Nigeria, utilisation of gas
turbines in Tanzania and production ramp up in the rest of
Africa should also support margins. Key elements of its
business model are to: expand rapidly and profitably, while
its competitors are hampered by debt or smaller scale;
target high growth, populous markets with cement deficits
and older and less efficient producers.
DCP’s operations remain susceptible to external factors
(including gas and foreign currency shortages), and
vagaries of the economy. This notwithstanding, the strong
financial profile, serves to moderate the impact of external
shocks. DCP remains well-capitalised for a cement
company, given the long life of the plants (>30 years). This
presents a core rating strength. That said, risks in this regard
continue to emanate from obsolescence, the potential for
punitive regulatory changes in key territories, and
competitive pressures, and the currency mismatch in
respect of funding fixed capital in most African territories
using debt. GCR has thus considered the legacy parental
support, which in addition to the planned use of listed
instruments, does lend DCP a fair amount of headroom
with respect to funding.
(50)
0
50
100
150
(500)
0
500
1,000
1,500
FY17 FY18 FY19 FY20 FY21
%USD'm Figure 3: Net debt and gearing forecasts
Net debt (LHS) Net gearing Net debt : EBITDA
Nigeria Corporate Analysis | Public Credit Rating Page 10
Dangote Cement Plc
(Naira in millions except as noted)
Year end: 31 December
Statement of comprehensive income 2012 2013 2014 2015 2016 1H 2017
Turnover 298,454 386,177 391,639 491,725 615,103 412,678 EBITDA 174,113 227,876 222,720 261,931 256,778 203,005 Depreciation (27,621) (33,706) (36,266) (54,626) (74,750) (40,177) Operating income 146,492 194,170 186,454 207,305 182,028 162,828 Net finance charge (10,844) (6,722) (14,902) (31,778) (42,719) (19,127) Forex and reserving 0 1,905 12,873 12,250 41,155 11,210 Other operating income/(expense) 0 1,408 264 517 465 670 Net Profit Before Tax 135,648 190,761 184,689 188,294 180,929 155,581 Taxation paid 9,377 10,437 (25,188) (6,971) 5,695 (11,537) Net Profit After Tax 145,024 201,198 159,501 181,323 186,624 144,044 Other comprehensive income (2,310) 0 1,602 (26,245) 100,701 26,143 Total Comprehensive Income 142,714 201,198 161,103 155,078 287,325 170,187
Statement of cash flows Cash generated by operations 180,268 231,208 241,933 275,395 243,865 197,460 Utilised to increase working capital (32,562) 52,466 (26,359) 26,356 35,857 (49,934) Net interest paid (9,859) (6,389) (13,461) (23,308) (36,367) (26,701) Taxation paid (2,539) (1,936) (226) (2,234) (1,128) (2,830) Cash flow from operations 135,308 275,349 201,887 276,209 242,227 117,995 Maintenance capex‡ (27,621) (33,706) (36,266) (54,626) (74,750) (40,166) Discretionary cash flow from operations 107,687 241,644 165,621 221,583 167,477 77,829 Dividends paid (19,364) (51,122) (119,284) (102,243) (136,324) (144,844) Retained cash flow 88,323 190,522 46,337 119,340 31,153 (67,015) Net expansionary capex (94,068) (147,060) (158,816) (102,466) (44,091) 0 Investments and other (65) (443) (1,596) (298) (745) (682) Proceeds on sale of assets/investments 10,903 11 1,487 0 0 0
Shares issued 0.0 0.0 0.0 0.0 0.0 0.0 Cash movement: (increase)/decrease (22,569.8) (29,402.0) 53,746.6 (25,062.0) (71,110.0) 14,684.0 Borrowings: increase/(decrease) 17,476.6 (13,628.7) 58,841.7 8,486.0 84,176.0 53,013.0 Net increase/(decrease) in debt (5,093.2) (43,030.7) 112,588.2 (16,576.0) 13,066.0 67,697.0
Statement of financial position Ordinary shareholders interest 395,575 542,758 584,025 648,345 806,125 815,054 Outside shareholders interest 7,234 5,029 4,161 (6,235) (12,925) 2,316 Pref. shares and convertible debentures 0 0 0 0 0 0 Total shareholders' interest 402,810 547,787 588,186 642,110 793,200 817,370 Current debt 51,697 56,289 117,263 47,275 220,300 305,446 Non-current debt 112,462 124,850 131,942 208,329 152,475 127,123 Total interest-bearing debt 164,159 181,140 249,205 255,604 372,775 432,569 Interest-free liabilities 89,505 113,192 143,630 210,619 357,788 382,722 Total liabilities 656,474 842,119 981,021 1,108,333 1,523,763 1,632,661 Property, Plant and Equipment 523,107 673,181 827,285 926,306 1,168,907 1,207,691 Investments and other non-current assets 9,472 19,636 16,633 16,047 51,692 63,562 Cash and cash equivalent 44,425 70,502 20,593 40,792 115,693 110,573 Other current assets 79,470 78,801 116,510 125,188 187,471 250,835 Total assets 656,474 842,119 981,021 1,108,333 1,523,763 1,632,661
Ratios Cash flow: Operating cash flow : total debt (%) 82.4 152.0 81.0 108.1 65.0 54.6 Discretionary cash flow : net debt (%) 89.9 218.4 72.4 103.2 65.1 48.3
Profitability: Turnover growth (%) 23.6 29.4 1.4 25.6 25.1 34.2 Gross profit margin (%) 60.4 66.2 63.5 59.0 47.4 57.0 EBITDA : revenues (%) 58.3 59.0 56.9 53.3 41.7 49.2 Operating profit margin (%) 49.1 50.3 47.6 42.2 29.6 39.5 EBITDA : average total assets (%) 31.5 32.9 25.7 25.8 20.7 27.7 Return on equity (%) 43.5 40.0 28.3 29.4 25.7 35.5 Coverage: Operating income : gross interest (x) 11.0 15.7 10.3 6.2 4.0 6.7 Operating income : net interest (x) 13.5 28.9 12.5 6.5 4.3 8.5 Activity and liquidity: Trading assets turnover (x) 21.3 27.1 33.6 35.5 39.6 25.9 Days receivable outstanding (days) 3.3 4.8 5.1 3.9 6.6 6.4 Current ratio (:1) 0.9 0.9 0.6 0.8 0.6 0.9 Capitalisation: Net debt : equity (%) 29.7 20.2 38.9 33.5 32.4 39.4 Total debt : equity (%) 40.8 33.1 42.4 39.8 47.0 52.9 Net debt : EBITDA (%) 68.8 48.6 102.6 82.0 100.1 79.3 Total debt : EBITDA (%) 94.3 79.5 111.9 97.6 145.2 106.5
‡Depreciation used as a proxy for maintenance capex expenditure
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SALIENT POINTS OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument. The ratings expire in August 2018. Dangote Cement Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The credit rating/s has been disclosed to Dangote Cement Plc with no contestation of the ratings. The information received from Dangote Cement Plc and other reliable third parties to accord the credit ratings included: - the 2016 audited annual financial statements and audited comparative results for the preceding four years, - revised financial forecasts spanning 2017 to 2021, - unaudited management accounts to June 2017, - a completed rating questionnaire containing additional information on Dangote Cement Plc, - Insurance schedule for Dangote Cement Plc, - breakdown of facilities available and related counterparties The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
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