Change is the only constant in life, and one’s ability to adapt to those changes determines the person’s success in life. These are the words of American-born Benjamin Franklin several decades ago, and reflect the current efforts of Dangote Cement (DanCem) to significantly grow its business amid a myriad of headwinds.
Keeping businesses afloat in Nigeria’s environment is extremely tough, especially after a pandemic era. A lot of companies have divested and the few existing ones have reduced their labor force to stay in business.
Analysts at Coronation Research Team believe there will be more “potential growth opportunities in the cement market of which Dangote Cement has positioned itself as a market leader accounting for about 60percent of the industry in Nigeria.”
“These growth opportunities for Dangote stem from rapid demand growth in the domestic market of Nigeria as well as its Pan-African (Rest of Africa) markets as housing infrastructure, commercial construction, and government projects including major highways, roads, and railways. gain traction,” Coronation Research Team said.
In this article, there are five charts that give insights into Dangcem’s growth over the past five years.
Double-digit revenue growth
Dangote cement recorded two consecutive growths in revenue in 2020 and 2021. The company grew by 33.79 percent and 15.98 percent to N1.38 trillion in 2021 and N1.03 trillion in 2020 respectively. The highest in the past five years.
According to Coronation Analysts, the growth in these two years as a result of the increased demand from the housing sector and commercial construction despite volatility in the landing cost of cement and clinker, especially in its Pan-African operations.
Read also: Dangote Cement begins conversion of waste-to-energy
Contrary to the growth in 2021 and 2020, the company saw a decline in revenue to N891 billion in 2019 from N901 billion in 2018.
Aggressive capacity roll-out
From 2016 to 2021 Dangcem’s installed capacity in Nigeria increased from 29.2 million metric tonnes (mmt) to 38.3mmt, a compound annual growth rate (CAGR) of 5.5 percent.
According to the Coronation analysis report, the roll-out capacity in the rest of Africa has been a little slower, with installed capacity rising from 13.6mmt to 16.3mmt from 2016 to 2021, a CAGR of 3.7 percent.
Dangote Cement’s sales growth in Nigeria has been driven by an aggressive capacity roll-out.
Double-digit profit growth
The company’s profit also increased by 32 percent in 2021 to N364.44 billion and grew by 37.68 percent in 2020 to N276.07 billion from N200.52 billion in 2019.
The company’s profit grew the most in 2018, within the period under review by 91.1 percent, to N390.33 billion from N204.25 billion in 2017.
According to the Coronation company analysis report, the group has benefited from tax incentives granted by the Federal Government of Nigeria under the pioneer tax status scheme, which
kept its effective tax rate below the statutory rate of 32% from 2016 to 2020 while in 2021, the effective tax rate was 32%.
Profit margin
This is a financial ratio that shows how a company is able to turn as much of its revenue into profit.
According to BusinessDay analysis, the net profit margin is measured as the net profit divided by revenue multiplied by hundred. A higher profit margin shows the firm is more efficient in generating more profit from its revenue and vice versa.
Businessday analysis shows that from 2016 till 2021, Dangcem turned more of its revenue to profit the most in 2018 by 43.31 percent.
This declined in 2019 to 22.49 percent, however, increased in 2020 to 26.69 percent and declined marginally to 26.33 percent in 2021.
Debt to equity ratio
This ratio shows if a company is using more debt to finance its operations or equity. It is measured by dividing the total debt by total equity. If the debt-to-equity ratio is high it means the company is using more debt to finance its operation and vice versa.
The company’s yearly financial report shows that its debt-to-equity ratio declined to 0.23 in 2021 compared to 0.38 in 2020. The company had the lowest in 2018 compared to the other years in the period under review.
The analysis report, therefore, recommends Dangote Cement as a BUY.
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