Dangote Cement’s first Quarter (Q1) 2020 numbers were largely lackluster, reflecting the tough operating environment for industrial firms, amid the slowdown induced by the global coronavirus pandemic.
A line item that stood out from the results is the loaning of N30 billion to parent firm Dangote Industries Limited (DIL) by Dangote Cement.
This is from a nil position in December 2019.
Dangote Cement is cash rich with net cash and cash equivalents equal to N112 billion at the end of 2019, while DIL on the other hand has numerous projects it is financing chief of which is the 650,000 barrels’ refinery being constructed in Lagos.
So it is understandable that such a loan is given, although shareholders may want to know if the terms of the loan are favorable for Dangote Cement.
For instance, when Dangote Cement borrows from the parent company (for which it has an outstanding balance of N2.12 billion as at March 2020), the Interest on the loan is charged at 8.5% per annum.