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Dangote Cement: Still Waxing Stronger With Impressive Performance

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Capital market analysts have rated the performance of Dangote Cement Plc in the first half of the year, 2018 to be very strong and impressive.

The company which published its half year results for the period ended June 30, 2018 showed that the Group’s revenue grew by 16.91 per cent over the comparable period of 2017. The reported figure for the period was N482.43 billion compared to the N412.67 billion of H1, 2017

Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood smartly over the figure quoted in similar period of 2017 by 22.64 per cent, that is, it is currently at N200.51 billion, as against the previous N163.49 billion. Profit before tax stood at N185.53 billion, while net profit for the period stood at N113.16 billion. The company reported earnings per share of N6.60 for the period ended June 2018. Higher than N6.41 reported for the comparative period in 2017.

On the liquidity/risk ratios, analyst noted that the estimated Debt to Equity value is well within acceptable limits, especially considering the high capital intensiveness of the cement business.

While on the profitability ratios, when compared to other manufacturing companies, the 40.96 per cent cost of sales margin achieved by Dangote Cement is commendable. Profit margin stood at 11.77 per cent, while return on average equity is fair at 15.55 per cent, higher than 13.34 per cent return achieved in 2017.

Also, all efficiency ratios improved over the corresponding period of 2017, total asset turnover grew by 10.73 per cent to stand at 27.90 per cent as against the 25.19 per cent of the previous half year. Equity turnover also improved by 32.13 per cent as it currently estimated at 66.28 per cent as against 50.16 per cent.

Capital market analysts noted that all investment ratios estimated from the half year financial statistics of Dangote Cement are positive and quite impressive, As in the company’s earnings figures, the estimated Earnings per share (EPS) of Dangote Cement is 3.15 per cent above 2017 estimate with EPS is currently N6.64 from N6.44

Meanwhile, due to better income realized from Exchange differences on translating net investments in foreign operations, and other comprehensive gains/losses in 2017 compared to H1-2018, the total comprehensive income per shares stood at N7.36, a 7.67 per cent below the N7.97 estimated last year. The price to earnings ratio was fairly revalued by the investing public as it now stands at 8.84x from the previous estimate of 9.51x. Current operating expenses (Opex) margin is 23.46 per cent, an 11.77 per cent below the 26.59 per cent estimated in the corresponding quarter of 2017. This is a welcome development.

Analysts at Cordros Capital stated that “we revise Dangote Cement-based target price higher to N216, previously N195.58, as we cut 2018-2019 capital expenditures (capex) by 25 per cent average and reduce risk free rate to 13.6 per cent, previously 14.1 per cent and upgrade rating to HOLD, previously SELL.”

Speaking on the company’s performance in half year, Group chief executive officer of Dangote Cement, Joe Makoju revealed that the company has invested a $3 billion to build manufacturing plants and import/grinding terminals across Africa.

The company’s operations, according to Makoju are in Cameroon (1.5Mta clinker grinding), Congo (1.5Mta), Ghana (1.5Mta import), Ethiopia (2.5Mta), Senegal (1.5Mta), Sierra Leone (0.7Mta import), South Africa (2.8Mta), Tanzania (3.0Mta), Zambia (1.5Mta).

For the second quarter under review, Makoju also revealed that while total Nigeria sales volumes went up by 13.9 per cent to 7.8Mt, Pan-African volumes reduced by 3.9 per cent, mainly due to shutdown in Tanzania.

In all, the company, which employed 27,952 workers in Nigeria in 2017 had its revenue increased by 16.9 per cent and its earning per share also increased by 3 per cent to N6.60 kobo per share for the second quarter, ended in June 30, 2018.

Makoju said, “our first-half performance was very strong and driven by an excellent recovery in Nigeria, where our sales volumes increased by nearly 14 per cent and revenues rose by more than 18 per cent. Pan-African operations saw a slight fall in volumes but both revenues and EBITDA increased because of better pricing and currency conversion effects.

“In addition, we achieved the largest-ever issuance of Commercial Paper by a Nigerian company when we issued N50 billion Series 1 and 2 Notes at the end of June, with a discount rate that reflected the strength of our Company and its excellent credit ratings.”

He however said that “our strong performance has been overshadowed by the tragic and heartbreaking events in Ethiopia.”

At the company’s recently annual general meeting (AGM) held in Lagos, the chairman of Dangote Cement, Aliko Dangote attributed the 31 per cent increase in the company’s revenue, of N805.6 billion, for the 2017 financial year, to its pan African operations growth which also recorded a significant increase in revenue from N195 billion to N258.4 billion in 2017.

He said, “Pan African operations increased volumes by 8.4 per cent, with Ethiopia, Senegal, Cameroon and South Africa all performing strongly and close to their operating capacity”

Noting that the company experienced some challenges in operating in sub-Saharan Africa, Dangote said “the Management responded in robust fashion and benefited from the diversity we have created across our business and because of our local knowledge and attitudes towards doing business in neighboring countries in Africa.”

Explaining the rationale behind the success recorded by the Dangote Cement’s revenue, Makoju said “the increase was helped by our decision to increase our use of local coal in Nigeria and that also helped to improve our fuel security, maintain production uptime and it reduced our need for foreign currency. We source coal from our parent company, Dangote Industries and from another Nigerian supplier, and we are very happy with the way this has worked out for us because it has enabled us to phase out the use of expensive low pour fuel oil in our kilns and also to reduce our use of imported coal”

On the future growth plans for the Group, Makoju said “As it stands, I think we will focus on building new grinding plants along the coast of West Africa, and ensure we have clinker export facilities in Nigeria. We are looking at the possibility of two new lines in Nigeria, perhaps by the end of 2020 and its likely these will be in Edo state and Obajana, with a combined capacity of 6Mta.”



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