Dangote Cement Plc, being the first Nigerian corporate body to undertake a share buyback as a corporate action, has once again proposed to buy back 10 per cent of its issued shares from shareholders.
The shareholders of the company, on December 13, 2022, authorised the management of the company to undertake a share buyback of up to 10 percent of its issued shares, effective from the date of the resolution.
The company had earlier indicated an interest in undergoing a share buyback programme, in respect of up to 10 percent of its issued shares, for the purpose of improving the company’s return on equity and its shareholders’ value, so as to facilitate the future long-term growth of the company.
The approval through voting, which was given at the company’s Extraordinary General Meeting, held in Lagos recorded a 100 per cent approval from the shareholders, with many of them describing the exercise as very laudable and a win-win situation for them.
Among other resolutions, the shareholders authorised that the Memorandum and Articles of Association of the company be amended (as applicable), upon completion of the share buyback, to reflect the company’s share capital, following the cancellation (if any) of the shares acquired and/or otherwise held by the company.
The board was also authorised to ensure that the amendment of the Articles of Association of the company reflects the company’s share capital, following the cancellation (if any) of the shares acquired and/or otherwise held by the company.
A share repurchase reduces the total assets of the business so that its return on assets, return on equity, and other metrics improve when compared to not repurchasing shares. Reducing the number of shares means earnings per share (EPS) can grow more quickly as revenue and cash flow increase.
Reasons for Dangote Cement buying back shares are to increase long term shareholder value. Also, the exercise is expected to support the cement manufacturer’s continuous capital structure and balance sheet optimisation process. This means that repurchasing shares while improving financing and balance sheets efficiency is expected to reduce the cost of capital and enhance investors’ value.
While some investors prefer cash distributions, others would choose to stay invested in a company. To cater to both, Dangote Cement decided to use a combination of dividends distribution and share buybacks to strike the right balance, while the initiative would help reduce the number of shares outstanding and increases the proportional rights of any single share. This means that the earnings per share (EPS) would be higher due to the share buyback and shareholders that want to remain invested in the company in the long term would benefit from this.
On December 21, 2020, the first tranche, ‘Tranche I’ of the share buy-back programme, was announced. The programme commenced on December 30 2020 and was completed on December 31.
Furthermore, in January 2022 the Company completed the second tranche of its buy-back programme. Dangote Cement has now repurchased 0.98 per cent of its outstanding shares. This share buy-back programme reflects the Company’s unwavering commitment to creating value and identifying opportunities to return cash to shareholders.
Recall that the Shareholders, at the company’s recent 13th Annual General Meeting (AGM), commended the Management of the company for an impressive performance despite the economic challenges in the year under review.
Unanimously, they approved N20 per share for the year ended December 31, 2021, as against the N16 paid in the preceding year. That represented a 25 per cent increase in dividend compared to the 2020 dividend of N16.00 per share, reinforcing the Company’s commitment to maximising shareholder value. They also applauded the company for its drive in reducing unclaimed dividends of the company.
Dangote Cement in the year under review achieved its highest profit before tax in its history at N538.4 billion. Also, the Company recorded Group volumes of 29.3Mta, up 13.8 per cent. Exceptional EBITDA of N684.6 billion was achieved, up by 43.2 percent owing to strong cost control measures.
Chairman of the company, Aliko Dangote, said: “over the last decade, Dangote Cement has recorded exponential growth across all areas. Group volumes are now at almost 30Mta, our capacity has tripled to 51.6Mta and we export cement from five countries across Africa.”
“As the volatile global environment propels us into a new era of uncertainties, we are fortunate that the last two years have taught us resilience, adaptability, and grit. These values are what we need to face in unpredictable times in the future.”
“Dangote Cement remains the leading cement company in Africa, well-positioned for a positive and sustainable future. We are resolute in transforming Africa while creating sustainable value for our stakeholders,” Dangote added.
It will be recalled that shareholders lauded Aliko Dangote led Management for coming up with this initiative that will both enhance the share value of the company and also ensure more returns on their investment.
Founder of the Independent Shareholders Association, Sir Sunny Nwosu said Nigerian shareholders will forever appreciate the share buyback plan of the company especially at this time of the year.
In the same vein, president of Authentic Nigerian Shareholders Association, Alhaji Mohammed Audu described Dangote as a God-sent and expressed hope that the money realized from the share buyback by the shareholders will be used for investment purposes.
Also, capital market operators lauded Dangote Cement’s share buyback programme. The chief executive officer, Sofunix Investment and Communications, Mr Sola Oni, said that share repurchase was a strategy deployed by a company to reduce its float by taking advantage of undervalued shares, saying that “this helps to reduce cost of capital or equity financing for the company. It also helps to firm up the share price in the medium and long term.
“A company can use share buyback to consolidate its equity. This is a way of reducing the numbers of shareholders and thereby reduces the burden of dividend and bonus shares among others.”
He also noted that “The method increases Earnings Per Share (EPS) and boosts Return On Equity (ROE) for shareholders while upward trends in the share price as a multiplier effect of share buyback creates demand for the shares and therefore attracts more investors into the market.”
The chief operating officer, InvestData Limited, Mr. Ambrose Omordion, said that the Dangote Cement buyback share was the first in the history of Nigerian Exchange.
Omordion said, the proposed share buyback was an indicator that Dangote Cement was trading below the fair value, saying that the shares buyback would later be cancelled, and that would enhance value of Dangote Cement shares in the market.
Dangote Cement is Sub-Saharan Africa’s leading cement producer, with a combined capacity of 51.55Mta across the continent (35.25Mta in Nigeria). It operates a fully integrated “quarry-to-customer” business with activities covering manufacturing, sales and distribution of cement. Through its investments, the Company has eliminated Nigeria’s dependence on imported cement and has transformed the nation into an exporter of cement, serving neighbouring countries.
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