Rating Release
Agusto & Co. hereby affirms the “Bbb+” rating assigned to African Foundries Limited
The rating expires on 30 June 2024.
Agusto & Co. hereby affirms the “Bbb+” rating assigned to African Foundries Limited (“African Foundries”, “AFL” or “the Company”). The rating reflects the Company’s good profitability, good cash flow position as well as moderate leverage position. The rating is further enhanced by AFL’s leading position and strong brand equity in the Steel Manufacturing Industry as well as its stable, qualified and experienced management team. The rating also takes into cognisance the direct reduced iron (DRI) project completed in 2022 that is expected to reduce reliance on scrap for raw materials and further boost the Company’s operational efficiencies and profitability. However, African Foundries’ rating is tempered by the its concentrated ownership structure, corporate governance that requires further strengthening, inadequate working capital and rising intercompany receivables. In addition, the Company’s overall performance was impacted by its exposure to foreign exchange risks on imported spares and equipment, as well as the global supply chain disruptions elicited by the ongoing Russian-Ukraine conflict, with potential adverse impact on equipment and spare parts sourcing.
African Foundries Limited is a leading steel manufacturing company in Nigeria. The Company is part of African Industries Group (AIG), with several business interests in Nigeria. AFL has one of the largest fully integrated steel manufacturing plants in Africa, with the capacity of producing varieties of steel products including steel billets, reinforcement bars and cold drawn steel wire rods.
The opinions expressed in this rating release do not represent any investment or other advice and should therefore not be construed as such. Visit www.agusto.com for further information.
