Earnings reported by Dangote Cement (DangCem) in 2022 have grown more slowly than expected, reflecting pressure from high prices of cost items, as costs continue to climb as a result of growing inflation and the naira devaluation.
Data reveals that the cement maker reported profit and earnings before, interest, tax, depreciation, and amortization (EBITDA) growth of 4.9 percent and 3.45 percent respectively in 2022.
DangCem’s profit grew to N382.31 billion in 2022 from N364.44 billion in 2021; finance income surged by 86.42 percent to N38.72 billion in 2022 from N20.77 billion in 2021.
The firm’s finance costs grew faster by 98.40 percent to N130.37 billion in 2022 from N65.71 billion in 2021.
DangCem’s finance costs surged on the back of a 515 percent spike in foreign exchange loss during the period to N53.9 billion from N8.77 billion in 2021.
EBITDA grew to N708.24 billion in 2022 from N684.6 billion in 2021.
While earnings grew at a slow pace, the cement maker reported double digits revenue amounting to N1.62 trillion in 2022, 16.96 percent up from N1.38 trillion in 2021, on the back of price increases during the period which offset volume declines.
The group’s average price per tonne grew by 23.30 percent to N58,282 per tonne in 2022 from N47,270 per tonne in 2021, while volumes sold declined by 5.14 percent 27.77 million tonnes (Mt) from 29.27 million tonnes in 2021.
Management attributed the decline in volumes to consistent disruptions in energy supply as witnessed in the third quarter of 2022, heightened inflation, and the high base of 2021.
In Nigeria, DangCem sold 17.8Mt of cement and clinker during the period, down 4.1 percent from the 18.6Mt sold in 2021, while the average price per tonne was 26.58 percent higher year on year, bringing revenues to rise by 21.3 percent to N1.21 trillion in 2022.
“The slightly lower volume, elevated by the high base of 2021 was due to significant inflation, rising interest rates, and energy supply disruptions which impacted production. The energy disruptions were largely due to low gas generation in the country. Collectively, this negatively impacted our ability to maximize production during the period,” DangCem said.
The pan-African operations sold around 10.0Mt of cement and clinker in 2022, down 8.1 percent from the 10.9Mt sold in 2021, due to the continuous global supply chain disruption and increasing commodity prices.
“This was exacerbated, by a shutdown in our Congo plant for over 2 months owing to maintenance and repairs, coupled with extended power plant maintenance in Senegal. In Cameroon, Ghana, and Sierra Leone freight costs remain substantially elevated, causing volatility in the landing cost of cement and clinker. The total pan-African volume accounts for 35.9 percent of Group volumes,” according to DangCem.
The cement makers’ input costs during the period claimed 40.96 percent during the period and grew by 20.30 percent in 2022 to N662.89 billion from N551.02 billion in 2021.
Michel Puchercos, chief executive officer, said “for our operations, Dangote Cement experienced a surge in prices of our inputs costs; significant foreign exchange fluctuation in our countries of operation; and a drop in gas availability in Nigeria.”
Materials consumed increased by 12.1 percent to N196.5 billion, despite the reduction in production volume owing to inflationary pressures, while fuel & power consumed increased by 35.5 percent to N266.5 billion due to increasing energy costs especially AGO and coal.
Operating expenses rose by 46.52 percent to N375.11 billion in 2022 from N256.01 billion in 2021 on the back of a 54.04 percent increase in selling and distribution costs.
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Selling and distribution expenses grew to N295.23 billion in 2022 from N191.66 billion in 2021 mainly driven by the 64.4 percent increase in haulage expenses as a result of the significant rise in AGO costs. Inflationary pressure and the devaluation of foreign currencies also drove part of this increase
“The rapidly increasing prices of AGO resulted in a 70 percent year-on-year increase in our selling and distribution costs in Nigeria. We have implemented a robust cost reduction strategy, including increased use of alternative fuel to improve our energy mix and the use of Compressed Natural Gas (CNG) for our trucks in the rising AGO cost environment,” DangCem said in a note.
Consequently, the EBITDA margin dipped by 600 basis points to 43.76 percent in 2022 from 49.48 percent in 2021.
Furthermore, on the back of rising interest rates, finance income surged by 86.42 percent to N38.72 billion in 2022 from N20.77 billion in 2021, while finance costs grew faster by 98.40 percent to N130.37 billion in 2022 from N65.71 billion in 2021.
DangCem’s finance costs surged on the back of a 515 percent spike in foreign exchange loss during the period to N53.9 billion from N8.77 billion in 2021.
DangCem’s CEO explained that the group’s finance costs were driven by the depreciation in the CFA and Ghana Cedi. “Moving forward, we intend to take up strategies around repayments and managing exposures to face off dollar-dominated liabilities,” he added.
Consequently, the profit margin dropped by 272 basis points to 23.62 percent in 2022 from 26.34 percent in 2021.
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DangCem reported a 9.35 percent increase in total assets totaling N2.62 trillion in 2022, from N2.39 trillion in 2021, while shareholder’s equity increased by 9.69 percent to N1.08 trillion in 2022 from N983.67 billion in 2021.
Total non-current assets increased to N1.59 trillion at the end of 2022 from ₦1.52 trillion in 2021. The increase was due to the acquisition of new equipment in line with our drive to ramp up the production of existing plants evident in its cash flow from investing activities.
Net debt increased by 87.87 percent to N422.9 billion at end of December 2022 from N225.1 billion at the end of 2021.
Cash flow from operating activities for the period declined by 35 percent to N387.84 billion in 2022 from N596.71 billion in 2021, indicating that its ability to generate more cash from operations during the period declined.
Net cash from investing activities for the period negatively amounted to N126.82 billion in 2022 due to the acquisition of property, plant, and equipment during the period., while net cash flow from financing activities was also negative amounting to N373.78 billion in 2022 largely driven by dividends and loan repayments during the period.
Consequently, cash and cash equivalents dropped by 42.7 percent to N150.85 billion in 2022 from N263.37 billion in 2021.
Ultimately, DangCem declared earnings per share of N22.27 per share in 2022 from N21.24 per share in 2021 and a proposed dividend of N20 per share.
