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Dangote Cement’s Impressive Growth



The management of Dangote Cement Plc presented its audited full year financial results ended December 31, 2018 to the investing public.It recorded a superb earnings performance.

The company rewarded its shareholders with an impressive return on their investment as the directors recommended an increased dividend of N16 per share higher than N10.50 paid previous year for approval at the Annual General Meeting scheduled for June 17, 2019. The proposed dividend is 52.4 per cent higher than that of the 2017 financial year and will result in a total dividend payment of N272.6 billion as against N178.9 billion in 2017.

Group revenue of the company increased by 11.9 per cent, from N805.6 billion to N901.2 billion, driven by increased volumes in Nigeria and a 9.5 per cent increase in revenues per tonne in Pan-African operations.

Cement volumes sold by Nigerian operations increased by 11.4 per cent, with revenue from Nigerian operations increasing by 11.9 per cent from to N552.4 billion to N618.3 billion. Sales to domestic customers in Nigeria increased by 11.7 per cent from 12.0Mt to 13.4Mt, with the remaining 0.77Mt being exported.

Full year Pan-African volumes remained broadly constant at nearly 9.4Mt, with lower volumes in Ethiopia, Ghana and Tanzania being offset by increases in Zambia and Senegal. The increase in revenue per tonne in Pan-Africa was mainly the result of depreciation of the naira, driving higher naira values when revenue was converted into Naira, as well as price adjustments in some countries. Pan-African revenue constituted 31.4 per cent of total Group revenue.

Group manufacturing costs increased by 9.1 per cent, mostly as a result of increased volumes in Nigeria. Manufacturing costs in Nigeria increased by 7.4 per cent from N158.6 billion to N170.3 billion, on the back of the 11.4 per cent increase in sales volume for 2018.

Although Pan-African volumes remained constant, manufacturing costs increased by 10.6 per cent from N192.7 billion to N213 billion, mainly due to exchange rate impacts as well as input price adjustments.

Total administration and selling costs rose by 22 per cent to N189.4 billion, mostly as a result of higher sales and associated distribution costs in Nigeria, which also include increased export sales from Nigeria whose delivery costs are higher.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 12.1 per cent to N435.3 billion, as a result of the increased volumes in Nigeria and better prices per tonne achieved by Pan-African operations.

Despite level volumes, Pan-African EBITDA rose by 28.2 per cent to N49.1 billion, at 17.3 per cent margin, driven by better pricing that helped to offset losses in Tanzania, Congo and Ghana. Operating profit of N338.7 billion was 11.3 per cent higher than the N304.2 billion in 2017, at a margin of 37.6 per cent driven by higher profitability in Nigeria. Interest income increased by 23.9 per cent, mainly as a result of higher average cash balances and improved interest rates in Nigeria and Ethiopia.

The Group’s profit for the year was up 91.1 per cent to N390.3 billion from N204.2 billion, resulting to earnings per share increase of 95.9 per cent to N22.83 as against N11.65 achieved in 2017.

Cash of N424.4 billion was generated from operations. Financing outflows stood at N257.1 billion due to net loans repaid of N32.3 billion, interest paid of N45.8 billion and a dividend payment of N178.9 billion.

Cash and cash equivalents decreased slightly from N161.8 billion at the end of 2017 to N159 billion at December 31, 2018. With net loans repaid at N32.3 billion, net debt decreased by N35.3 billion from N203.7 billion at the end of 2017 to N168.4 billion at the end of 2018, giving a net debt to EBITDA ratio of 0.39x, reflecting the continuing strong cash generation achieved by the Group and improving its already healthy balance sheet position.

Group chief executive officer of Dangote Cement, Joe Makoju, said, “The financial performance was driven by a strong increase in our home market, Nigeria, despite heavy rains and uncertainties about the election.

“Although Pan-African volumes were unchanged in 2018, I am confident that we will see an increase in 2019, driven by higher volumes in Tanzania, Ethiopia, Congo and Sierra Leone. Now that we have gas turbines operating in Tanzania we will also see increased profitability in the Pan-Africa region and this will help to improve overall Group margins.”

In a statement by the company said, the directors continue to apply the Going Concern principle in the preparation of the financial statements, saying after considering the liquidity position and the availability of resources, the directors concluded that there are no significant threats to the Group’s Going Concern capabilities.

The directors believed that the current working capital is sufficient for the operations and the Group generates sufficient cash flows to fund its operations, adding that borrowings are mainly to fund the expansion projects.

On the outlook, Dangote Cement said 2019 has started well with sales volumes in Nigeria more than 10 per cent ahead of last year, saying the federal government has committed itself to a strong programme of infrastructure investment and incentivisation that will drive increased roadbuilding, including the construction of concrete roads.

Also, Analysts at Afrinvest Limited said that “we are optimistic of sustained outperformance in earnings over the medium-term. In full year, 2019, we expect a 10.4 per cent expansion in revenues to N995 billion, supported by a recovery in volumes in Nigeria and for Pan-African operations. We expect smoother operations in Tanzania due to the recent installation of gas turbines and improved SSA growth to support Pan-African volumes.”

They pointed out that “given our improved expectation of the group’s performance over the medium-term, we revised our target price slightly upwards to N263.1. This translates to an upside potential of 34.7 per cent based on the closing share price of N195.3 on February 28, 2019, and we attached a “BUY” rating.”

Dangote Cement is Africa’s leading cement producer with nearly 46Mta capacity across Africa. A fully integrated quarry-to-customer producer, it has a production capacity of 29.3Mta in its home market, Nigeria. Obajana plant in Kogi state, Nigeria, is the largest in Africa with 13.3Mta of capacity across four lines; its Ibese plant in Ogun State has four cement lines with a combined installed capacity of 12Mta and Gboko plant in Benue state has 4Mta. Through its recent investments, Dangote Cement has eliminated Nigeria’s dependence on imported cement and has transformed the nation into an exporter of cement serving neighbouring countries.

In addition, it has operations in Cameroon (1.5Mta clinker grinding), Congo (1.5Mta), Ghana (1.5Mta import), Ethiopia (2.5Mta), Senegal (1.5Mta), Sierra Leone (0.5Mta import), South Africa (2.8Mta), Tanzania (3.0Mta), Zambia (1.5Mta).