Africa’s largest Cement producer and Nigeria’s largest listed company, Dangote Cement plc has issued N50 billion Series 1 and 2 Notes under its N150 billion Commercial Paper Programme which will be used for capital expenditure, working capital and general corporate purposes. The tenor for the initial issuance is 180 to 270 days, with a discount rate of 12.4 percent that will yield 13.21 percent for the 180 days, while that of the 270 days has a discount rate of 12.65 percent and with a yield of 13.96 percent.
“This landmark transaction is the largest ever commercial Paper issuance by a corporate issuer in Nigeria as it allows us to broaden our sources of funding and combine established bank lines of credit with access to capital market funding, which will lower our overall cost of borrowing,” Joe Makoju, Group Chief Executive Officer of Dangote Cement said.
Notes of this issuance will be listed on the Nigeria’s FMDQ OTC Securities Exchange on July 19, with a minimum investment of N5 million and multiples of N1000 thereafter.
“The success of this programme reflects the high quality of our business and its strong cash generation which was made possible by our market leading positions in Nigeria and across Sub Saharan Africa, where demand for cement is growing rapidly,” Majoku said.
Dangote Cement was advised on the issue by Stanbic IBTC Capital Limited as Sole Arranger and Dealer; Stanbic IBTC Bank PLC is the Issuing Calculation and Paying Agent while Banwo and Ighodalo is Legal Counsel and Deloitte is Auditors to the Issuer.
Carl Franklin, head of investors’ relations at Dangote Cement Plc told BusinessDay that the commercial paper is a short-term funding programme that will be used for general corporate purposes however it won’t have any impact on the firm sales volumes as they expect to announce their Q2 results probably in three weeks’ time.
“The business is highly cash generative however from in q1 2018 our net debt /EBITDA was very low which showed our cash position as N215 billion and net debt of N85billion,” Franklin told BusinessDay by email.
BusinessDay investigation into the Financials showed cement firm’s net debt /EBITDA stood at 0.82x in 2015; increased slightly to 0.94x in 2016 but reduced to 0.52x in 2017.
Last month, Dangote Cement plc announced plans to raise N150 billion via commercial papers to refinance its debts as the company has N129 billion in current liability which is set to mature over the next 12 months.
Market operators said the capital injection would further boost the performance of the company.
“It’s a step in the right direction and once it’s successful it will be an eye opener for other companies to take advantage of commercial papers and restructure their expense loans,” Ayodeji Ebo CEO at Afri-invest securities Limited said.
Dangote Cement’s investments and expansion drive across Africa have been described as strategic and necessary towards the actualisation of economic advancement on the continent, while also ensuring that the Dangote brand becomes the most preferable to most African consumers.
According to reports, Dangote Cement intends to spend heavily on expansion, with $350 million earmarked for capital projects this year. This includes the building of export facilities at Nigeria’s seaports to boost shipments to neighbouring West African countries.
In the 2017 financial statement, the company directors informed investors that “The current working capital is sufficient for the operations and the Group generates sufficient cash flows to fund its operations. Borrowings are mainly to fund the expansion projects in various African countries.”
The other two main players in the Nigerian cement industry are Lafarge Africa Plc with a market cap of N355 billion and Cement Company of Northern Nigeria Plc (CCNN) with a market cap of N30.1 billion, both dwarfed by Dangote Cement with market cap of N3.79 trillion.
BusinessDay investigation into the 2017 financials of the top players showed Dangote Cement had N805 billion in revenue ; Lafarge Africa Plc generated N299 billion while Cement Company of Northern Nigeria made N14 billion.
In terms of profit, Dangote reported profit after tax of N204 billion in 2017, while Lafarge Africa Plc and Cement Company of Northern Nigeria Plc made N34.6 billion and N1.2 billion respectively.
Dangote Cement is a subsidiary of Dangote Group. The company was founded in 1992 and is one of the biggest cement producers in the country. The company’s shares currently trades at N222.
