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Amid the ongoing tussle between Dangote Refinery and Nigeria’s oil and gas sector Regulatory bodies, concerns have been raised as international rating firm, Fitch Rating has downgraded Dangote Industries Limited, DIL to ‘B+(nga)’ from AA(nga) placing the company on Negative Watch.
Some of the reasons for concern put forward by the rating agency for the downgrade include lower than expected sales results, as well as worse operational and financial performance compared to previous expectations.
The rating agency further explained that DIL was downgraded due to the devaluation of the local currency, and the lack of contracted reserve funds to service its significant debt facilities due on August 31, 2024.
More worryingly, Fitch Ratings lamented the absence of DIL’s audited financial statements for 2023 as a real corporate governance issue.
The international rating firm raised these concerns in a report released on Monday.
The report states: “Fitch Ratings has downgraded Dangote Industries Limited’s (DIL) National Long-Term Rating to ‘B+(nga)’ from ‘AA(nga)’ and the senior unsecured debt rating issued by Dangote Industries Funding Plc to ‘B+(nga)’ from ‘AA(nga)! Fitch has simultaneously placed the ratings on Rating Watch Negative (RWN). A full list of rating actions is below.
READ ALSO:FEC orders NNPC to sell crude to Dangote, other refineries in naira
“We view the absence of DIL’s audited financial statements for 2023 as a corporate governance issue. The RWN reflects uncertainty regarding the group’s ability to refinance maturing debt. The lack of concrete steps to refinance or repay maturing debt will lead to further downgrades while we do not expect positive rating action until the company’s liquidity position improves substantially.”
It added that the key drivers of the downgrade were: “Immediate Refinancing Risk: DIL has immediate debt repayment requirements related to the syndicated loan obtained to finance the construction of the Dangote Oil Refining Company (DORC). Any further delay in meeting the funding requirements would significantly increase the likelihood of financial restructuring or default and lead to a further downgrade of the ratings.
“Refinery Upgrade Underway: DORC has a nominal production capacity of 650,000 barrels per day (bpd) of refined petroleum products, which will be sold in Nigeria’s domestic and international markets.
“During the first half of 2024, the refinery operated at around 50 percent capacity and produced between 325,000 barrels of crude oil per day and 375,000 barrels of crude oil per day, but EBITDA contribution from DORC was well below our previous projections as the facility ramped up and optimized production.
“We expect a gradual increase in EBITDA contribution from DORC going forward following the commencement of gasoline production in Q3 this year.”
The downgrade comes amid crude supply challenges facing the 650,000 barrel per day Dangote Refinery.
By: Babajide Okeowo
The post Concerns as Fitch downgrades Dangote Group due to lack of funding plan to repay debt facilities, more appeared first on Latest Nigeria News | Headlines from Ripples Nigeria.
