As economic activities pick up post-lockdown, Dangote Cement posted an impressive performance for its 9 months 2020 results. According to Proshare report, strategic decisions were taken in H1 2020 to protect the group from the adverse effect of the COVID-19 pandemic which positioned the Lagos-based cement company for stronger financial performance in 9 Months 2020.
Key Highlights of the Report
• Sales volume increased Yearon-year ( Y- o-y) by + 6.59% to 19.21m tonnes in 9 months 2020 from 18.02m tonnes in 9 months 2019.
• Revenue grew by +12.01% from N679.79bn in 9 months 2019 to N761.44bn in 9 months 2020.
• Ebitda(earnings before interest, taxes, depreciation, and amortization )skipped forward ahead by + 17.08% Y- o-y from N303.22bn in 9 months 2019 to N355.02bn in 9 months 2020.
• EBITDA margin fell to 44.6% in 9 months 2020 from 46.6% in 9 months 2019
• Finance cost declined Y-O-Y by -13.79% from N39.79bn in 9 months 2019 to N34.29bn in 9 months 2020.
• Profit before tax (PBT) rose Y-O-Y by +37.58% from N197.68bn to N271.96bn while Profit after tax (PAT) increased Y-O-Y by +35.20%
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• Total borrowings increased Yo-y by +14.99% between 9 months 2019 and 9 months 2020.
• 7 clinker vessels exported to Cameron by September 2020 with the maiden vessel exported at the end of June 2020. Cross-border exports to the Niger Republic were approved by the federal government to assist in easing the building materials constraint in the neighbouring country. Profitability
Gross gote Cement revenue Plc of Dan- grew Y- o-y by + 12.01%, from N679.79bn in 9 months 2019 to N761.44bn in 9 months 2020 which was supported by a +6.59% increase in sales volume. The Nigerian market contributed 62.04% in total sales volume and also accounted for 70.33% in total revenue of the Group. Revenue from sales of cement and clinker accounted for N761.42bn while revenue from sales of other products by the Group accounted for N21m for the period (see chart 1).
With Nigeria being the obvious largest market of the company, total volumes for the Nigerian market grew by +10.2% and revenue also increased by +14.5% between 9 months 2019 and 9 months 2020.
In USD terms, Dangote Cement’s revenue declined by -9.77% from $2.21bn recorded in 9 months 2019 to $1.99bn in 9 months 2020 using the most recent official CBN exchange rate.
Profit before tax (PBT) of the company grew noticeably by +37.58% from N197.68bn recorded in 2019 to N271.96bn in 2020 which was driven by a -13.79% decline in finance cost, a +43.20% increase in finance income and a decline in selling and distribution cost of -2.07%. Gross profit grew Y-O-Y by +13.89% while profit after tax (PAT) bounced up by +35.20% (see chart 2).
Converting to USD, the cement and clinker maker recorded a +10.83% Y-O-Y growth in profit before tax (PBT) from $644.08m to $713.81m using the CBN official exchange rates.
The company’s quick /acid-test ratio rose to 0.50 in 9 MONTHS 2020 from 0.47 in 9 MONTHS 2019, a quick ratio portrays a more conservative liquidity position as it adjusts for a company’s unsold stock of goods and inputs in storage, Dangote’s quick ratio reconfirms tight liquidity (see chart 4 below).
Dangote’s cement business is organised into two strategic regions: Nigeria and the Rest of Africa. Each region pursues its business plan in line with the overall corporate strategy set out by the Group’s Board and Executive Management, but mindful of the prevailing conditions in each market.
Nigeria is Sub-saharan Africa’s largest market for cement, consuming more than 22 metric tonnes in 2019. From its three factories, all located south of the country’s two main rivers, it can reach every local market in Nigeria with its extensive and marketleading fleet of distribution trucks. In 2019, Dangote Cement sold 13.7 metric tonnes of cement to the domestic market.
The company’s strategy in every country is to be the leader on costs, quality and service. It builds large, modern, highly efficient plants that combine the latest equipment from Europe, China and beyond to enable it to make higher-quality cement at lower costs, thereby giving it strong competitive advantages.
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