Moody's downgrades Dangote Cement

Moody's Investors Service said it downgraded Dangote Cement plc’s long term corporate family rating to B2 from B1, the national scale long term corporate family rating to Aa3.ng from Aa2.ng and the probability of default rating to B2-PD from B1-PD.

However, the agency affirmed the (P)B2 local-currency rating and Aa3.ng national scale rating assigned to the NGN 300 billion domestic medium-term note program and the B2 local currency and Aa3.ng NSR to the senior unsecured notes issued by DCP. Moody's also changed the outlook to negative from under review.

"The downgrade of the CFR to B2 is driven by the increase in dollar debt in DCP's capital structure which was not initially contemplated in the B1 rating. This exposes DCP to increased currency risks because most its cash flow are generated in naira and other African currencies and the fact that all the dollar debt has maturities of less than a year. This currency risk is captured under Moody's B2 foreign-currency ceiling of Nigeria which is limiting the ability of DCP to be rated higher", say Dion Bate, a Moody’s vice president and lead analyst for Dangote Cement, in a press release.

"The downgrade however is not driven by concerns around the cement fundamentals in Africa or the business, which continues to perform strongly," added Bate.

The outlook mirrors the Nigerian sovereign's negative outlook, reflecting the view that DCP's credit quality is tied to the economic and political developments in Nigeria, Moody’s said.

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