Ahead of its planned N300bn bond issuance, the management of Dangote Industries Limited (the Dangote Group), on May 26, 2022, held an investors’ call where members fielded questions from analysts on salient issues regarding the bond, the running of the group, perceived foreign exchange risks arising from the fact that the two companies for which the bond proceeds are to be invested sell their products in the Nigerian Naira, but is exposed to foreign currency loans. In a summary to clients, analysts at Lagos-based Arthur Stevens Asset Management Limited, the Dangote team also doused fears about the entire group being centred around a single person and the ensuing risk, as well as the effects of the Russia-Ukraine war on the outlook for the fertilizer and oil refinery, besides correcting the notion that the Federal Government owns a 20% equity stake in the petroleum refinery scheduled for completion next year.
The company has a dollar debt base, but a naira revenue. How does it plan to service this debt?
Both the Dangote Fertilizer as well as Refinery plans to export from its capacity to raise Foreign exchange. Although it would earn Naira from the domestic markets; it would earn foreign exchange from the International markets to service outstanding USD denominated debt as well.
Why is the Obajana and Ibese plant not being fully utilized as regards Dangote Cement?
This is due to the low supply of Coal as well as low pressure from Gas. As a result of this, some plants were shutdown and resources moved elsewhere to maintain overall output and contribute to revenue.
How does the Syndicated loans affect the Bond payment?
The syndicated loans have minimal effect on the bond payments and credit quality of DIL or the associated projects. The revenues from the fertilizer plant, refinery and cement are projected to have a higher coverage ratio, especially from revenue coming from international sales to cover coupon payments and principal as well.
Does Dangote Industries limited not have a key man risk?
Dangote Industries Limited does not depend on the Chairman to make decisions. There is a group of seasoned professionals ‘exco’ members that make well informed decisions on project and business decisions. every position has at least two individuals with a solid succession plan at all times.
What is the effect of the Russia-Ukraine war on the business and its plans?
The war has had a positive effect on the firm as it has increased the price and revenues of Fertilizers and Energy commodities. Dangote Fertilizers sources all its materials domestically and also sell in the international market at these high prices caused by the war. The firm has been able to capture tremendous margins as a result of this.
Are there any other Interest in Dangote Refinery?
The Nigerian Government by way of NNPC (Nigerian National Petroleum Company Limited) own a 30% stake in Dangote Refineries.
Would the Refinery be run the same way Dangote Cement Plc is run?
Dangote Cement is listed on the premium board of the Nigerian Exchange and abides to very strict corporate governance laws. Holdings under Dangote industries Limited not publicly listed also abide by those laws as it is the philosophy of the company.
When would the Refinery be Completed and functional?
We expect mechanical completion by October 2022 and full completion and utilization 2nd Quarter of 2023.
What are the Key risks to these projects?
Various contractors meeting their obligations; especially during and shortly after the COVID pandemic. However, all contractors are available and obligations are being met. We see close to minimal or low operational, business and financial risk in the near future.