Dangote Cement Plc recently released its first half (H1) year 2021 financials which showed remarkable double-digit increase in revenue and profitability.
The performance was largely driven by higher sales volumes, as well as improved cost management in the half year of the year.
A review of the company’s results on the Nigerian Exchange (NGX) Limited, indicated revenues grew by 44.81 per cent from N476.85 billion in H1, 2020 to N690.55 billion in H1, 2021. The surge in revenues was as a result of increase in production volume and sale of cement and clinker, as well as increase in their bagging capacity.
Group sales volumes hit 15.3 Metric ton (Mt), with Nigerian operations accounting for a sales volume of 9.87 Mt while pan-African operations contributed the balance of 5.5Mt. The increase in sales volume was supported by an increase in housing infrastructure and commercial construction.
Also, the company recorded a rise of 72.83 per cent in its net finance cost to N20.94 billion from N10.63 billion in H1, 2020, which was buoyed by 46 per cent increase in finance cost to N30.35 billion and eight per cent decrease in finance income to N9.41 billion in the corresponding period of 2020.
Nevertheless, despite the upsurge in the expense items as well as the income tax expenses that grew by 144 per cent, the company’s profit after tax soared by 51.91 per cent from N126.14 billion in H1, 2020 to N191.63 billion in H1, 2021. Consequently, the earnings per share, which is the investor’s earnings indicator grew by 50.47 per cent to N11.21 in H1 2021, compared to N7.45 in H1, 2020.
Dangote Cement’s current ratio was 0.67x in H1 2021 as against 0.66x in H1 2020, and this implies the company is improving on meeting its short-term obligations.
Analysts at United Capital Plc stated that, “during the H1, 2021 period, Dangote Cement group revenues increased by 44.8 per cent year-on-year to N690.5 billion, supported by a 26.1 per cent surge in volumes sold to 15.3mmt and higher revenue-per-tonne, which was attributed to lower rebates and price increment during the period.
“The impressive growth was reflected in both the Nigerian and Pan-African market segments, as sales volumes were up by 33.2 per cent and 15.5 per cent, respectively. The substantial growth in H1-2021 reflects sustained strength in construction activities post-COVID pandemic in Nigeria and sub-Saharan Africa, which continues to spur cement demand across Dangote Cement’s markets. This is reflected in the group-wide volume growth recorded across all business regions, except Senegal. Notably, Dangote Cement resumed clinker exports from the Apapa and Onne terminals in Q2, 2020 with volumes up 103.6 per cent to 57.0Kt. Additionally, volume growth was supported by the new 3mmt Obajana line.”
Group managing director, Dangote Cement, Michel Puchercos, speaking on the results said: “we are pleased to report a solid set of the good results for the first half of the year. Our performance reflects the strong demand across the Group, with increases in revenue and profitability, compared to the same period last year. This strong intrinsic performance is magnified by the lower Q2, 2020 results because of COVID-19. The growth trend continues, and we are focused on meeting the strong market demand across all our countries of operation.”
On the steps taken by the company to protect the stakeholders, he said: “we also continue to maintain a strong focus on health and safety measures in all our engagements with stakeholders. We have learned a lot over the past year on how to mitigate risks associated with COVID-19. We remain committed to protecting our team members and communities by being fully compliant with local laws and regulations.
“We are improving the output of our existing and new assets and I am happy to announce that our 3 Mt Okpella Plant, Edo State, is on track to come on stream in the next quarter.”
Puchercos stated that, the company’s Alternative Fuel project which focuses on leveraging waste management solutions, reducing CO2 emissions and sourcing material locally, is at an advanced stage while procurement and installation of the necessary equipment across all plants is ongoing.
He added that Dangote Cement is focused on sound governance, saying, “we are leading the way with our commitment to sustainability and best practices. We are driven by the goal of achieving the highest level of governance and building a sustainable brand for all stakeholders. Transparency and consistency are at the core of every part our business culture.”
On the outlook of the company, United Capital said that demand, price increments will sustain double-digit growth, saying that “Going into H2, 2021, we remain optimistic on Dangote Cement and expect the company to sustain double-digit growth, albeit at a slower pace relative to H2, 2020, given the relatively high base from the period.
“On a macro-scale, we are optimistic about economic recovery in Nigeria and Sub-Saharan Africa, as well as sustained cement demand, which has driven capacity expansion plans. Additionally, price increases actioned in the first half of the year will help sustain topline growth and margins, as costs remain pressured.”
According to the Investment firm, furthermore, we see further room for price increments during H2, 2021 as demand remains strong and inflationary pressures persist. However, risks to a more robust H2, 2021 performance include disruptive rains in Q3, 2021, an intensified third wave of COVID-19 in SSA and attendant lockdowns, persistent disruptions in global supply chains, higher freight prices, further naira devaluation and elevated inflationary pressures. However, we observe that Dangote Cement has done particularly well in the face of rising expenses and this bolsters our optimistic outlook.
Dangote Cement became the first Nigerian listed company to report its financial results using XBRL format with the IFRS taxonomy. Adopting XBRL reporting format will strongly benefit Dangote Cement’s existing and potential investors. It represents another step in continuing efforts to modernise and enhance transparency of, and access to, companies’ disclosures.
Dangote Cement Plc is Sub-Saharan Africa’s largest cement producer with an installed capacity of 45.6Mta capacity across 10 African countries and operates a fully integrated “quarry-to-customer” business with activities covering manufacturing, sales, and distribution of cement.
The group has a production capacity of 32.3Mta in its home market, Nigeria. It has three cement plants in Nigeria, Obajana plant in Kogi state, with 16.3Mta of capacity across four lines; 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 recent investments, Dangote Cement has eliminated Nigeria’s dependence on imported cement and has transformed the nation into an exporter of cement serving neighboring countries.
In addition, Dangote Cement 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).
Dangote Cement has a long-term credit rating of AAA(NG+) by GCR and Aa2.ng by Moody’s due to its market leading position, significant operational scale and strong financial profile evidenced by the Company’s robust operating and net profit margins relative to regional and global peers, adequate working capital, satisfactory cash flow and low leverage.
Dangote Cement is a subsidiary of Dangote Industries Limited, a diversified and fully integrated conglomerate as well as a leading brand across Africa in businesses such as cement, sugar, salt, pasta, beverages, and real estate, with new multi-billion-dollar projects underway in the oil and gas, petrochemical, fertiliser and agricultural sectors.