Buhari legacy

DangCem’s profit declines by 10% on FX pressures, higher energy cost

Dangote Cement (DangCem), the largest cement company by market capitalisation, has recorded a 10 percent decrease in its half-year (H1) 2022 profit, due to higher foreign exchange pressures and energy costs incurred.

DangCem’s profit declined to N172 billion in the first half of 2022 from N191.6 billion in the corresponding period last year, the firm’s latest financial statement showed.

According to Coronation research, the earnings slump was mainly driven by elevated cost pressures and increased interest expenses.

For instance, DangCem reported a 16.8 percent increase in the cost of sales to N322.46 billion in H1 2022 from N276.12 billion in H1 2021, driven primarily by a 31.3 percent hike in fuel and power consumed (especially diesel and coal), that closed H1 2022 at N129.96 billion from N98.98 billion in H1 2021.

The firm noted that the slump in Nigerian production volume to 13.8 metric tonnes in the first half of 2022 from 14.5 metric tonnes in the same period last year, was due to persisting disruptions in energy supply which impacted volumes.

The cement maker also suffered N40.66billion foreign exchange loss in H1 2022 from N4.94billion reported in H1 2021, attributable to dwindling Naira in the foreign exchange market.

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This impacted the net finance cost, which surged, up 154.2 percent to N53.2bn in H1 2022 from N20.9 billion in H1 2021. The growth in net finance cost came from a 147.9 percent year-on-year increase in finance cost to N75.2 billion, which masked the 233.9 percent year-on-year increase in finance income to N22 billion.

The cement company’s revenue however increased by 17 percent to N808 billion from N690.5 billion in the comparable periods.

According to Coronation research, this growth was on the back of a price increase (average price per tonne rose by 30.2 percent year on year).

“The company was able to take advantage of higher prices amidst dwindling volumes across its Nigerian and Pan-African markets,” Coronation Research showed.

BusinessDay analysis shows the company realised a profit margin of 21.3 percent, indicating its efficiency in managing its expenses.

BusinessDay analysis shows the revenue was earned from the group’s two reportable operating segments, Nigeria and other entities operating outside Nigeria (Pan Africa).

Sales from Nigeria yielded revenue of N623 billion compared to N494 billion in the previous year while revenue from Pan Africa declined to N185 billion from N198 billion earned in the same period last year.

Earnings before interest Tax Depreciation, and Amortisation (EBITDA) increased by 6.3 percent to N373 billion in H1 2022 from N351 billion in the same period last year.

This is despite a 43 percent jump in operating expenses to N169 billion in H1 2022 from N118 billion in the same period last year. The surge in haulage expenses by 65 percent to N112 billion following the rise in diesel prices in Nigeria was the primary contributor to the increase in Operating expenses.

Consequently, the EBITDA margin shrank to 46 percent from 51 percent, in the same period last year.

Dangote Cement recorded a 2 percent decrease to N295 billion in net cash flow from operating activities in H1 2022 from N301 billion in the comparable periods.

It, however, recorded an increase in the cash used in financing activities by 18 percent to N354 billion from N300 billion.

Net cash flow used in investing activities increased by 82 percent to N82 billion from N45 billion in the comparable periods.