Dangote Cement H1 profit soars on price hike, beats estimates

Dangote Cement Plc, Africa’s largest cement producer, reported first half profit jump, thanks to cement price increase which the company implemented last year. The Nigerian cement maker increased the price of a bag of a cement by N600 in August 2016.

Favorable energy mix also improved the company’s operating margins.

Net profit after tax rose by 39.26 percent to N144.04 billion in the six months ended June 30 2017, the company said in a statement on the website of The Nigerian Stock Exchange (NSE). This compares to N103.42 billion in the corresponding period of last year, when cement makers’ earnings suffered a hit from an economic downturn.

The result beat N130.05 billion average estimate among seven analysts surveyed by BusinessDay.

Sales were up 41.23 percent to N412.67 billion as the company’s revenue got a boost from increase in the price of building materials.

Last year was horrendous for businesses as a sharp drop in price of oil since mid-2014 and a severe dollar shortage tipped the country to its first recession in 25 years.

Also, militant attack on oil facilities in the Niger Delta region last year undermined gas supply to factories, pushing up operating costs and hurting margins.

However, subsequent relative peace in the Niger Delta region that bolstered gas supply and oil production, and the company’s ability to mine its own coal for power generation, spurred it to growth and improved margins.

“According to management, there has now been a switch to coal, and the expensive LPFO has not been used in the five months till March. We believe the effects of these will be visible in subsequent quarters,” said analysts at Lagos-based CSL Stockbrokers Limited in an emailed note to clients.

 

DANGOTE CEMENT PLC: HALF YEAR FINANCIAL SUMMARY AND RATIOS
	2017	2016	Change (%)
Sales (N’m)	412,676.00	292,191.00	0.41
Cost of Sales (N’m)	177,549.00	139,187.00	0.28
Gross Profit (N’m)	235,127.00	153,004.00	0.54
Profit Before Tax (N’m)	155,581.00	124,890.00	0.25
Profit After Tax (N’m)	144,044.00	103,420.00	0.39
Total Equity (N’m)	822,688.00	797,345.00	0.03
Total Assets (N’m)	1,637,979.00	1,527,908.00	0.07
Earnings Per Share (N)	842.00	623.00	0.35
EBIT Margin (%)	39.60	33.60	0.18
Net Profit Margin (%)	37.70	42.70	(0.12)
Return on Equity (%)	0.18	0.13	0.35
Return on Asset (%)	0.09	0.07	0.30
Market Capitalisation as at July 28 2017 (N’million)		4,031,000.00
Share Price as at July 28 2017 (N)		235.51

Source: Company’s Financials; BusinessDay Analysis

Dangote Cement’s earnings before interest and tax (EBIT) margin rose to 39.61 percent in June 2017, from 33.55 percent as at June 2016. Gross profit margins increased to 56.97 percent in June 2017 from 52.31percent as at June 2016.

The company’s cost margin, a measure of efficiency, fell to 43.02 percent from 47.63 percent the previous year, thanks to energy savings. This means the company is spending less on input costs to produce each unit of product.

Dangote cement’s finance cost increased by 46.02 percent to N24.40 billion due to increased borrowing and increased finance costs when converting Pan African currencies to naira.

A times interest coverage ratio of 6.97 times earnings means the company’s operating income can cover all interest expenses.

Dangote Cement is Africa’s leading cement producer with Africa-wide capacity of nearly 46 million metric tons per annum (Mta); the company is also a fully integrated quarry-to-customer producer with production capacity of 29.25Mta in Nigeria.

Its Obajana plant in Kogi state Nigeria is the largest in Africa, with capacity of 13.25Mta across four lines.

Further analysis of Dangote Cement showed that total operating expenses increased by 27.83 percent to N72.05 billion while cost of sales were up 27.59 percent to N177.55 billion.

The company’s shares declined 3.87 percent to close at N235.10 as at close of trading on Friday, valuing it at N4.03 trillion.

 

BALA AUGIE