Dangote Cement is the most profitable company in Nigeria
A glimpse of Dangote Cement finances reveal that is it Nigeria’s most profitable company.
The largest company by market capitalisation in Africa’s largest economy made N154.35 billion in profit after tax (PAT) as at September 2019, according to data compiled by BusinessDay.
By comparison, Zenith Bank, the largest lender by profit made N150.20 billion, while MTN Nigeria, the largest telecommunications company made, N148.32 billion, while Guaranty Trust Bank, the largest lender by market value, made N146.98 billion, while Access Bank, made N90.73 billion.
Dangote Cement’s net income is 17.63 percent of the cumulative profit of the 30 most liquid and capitalised companies on the bourse, NSE 30.
Its market capitalisation of N2.97 trillion is 19.67 percent of the total market capitalisation on the bourse of N15.30 trillion.
The producer of the building material has been paying glamorous dividend to shareholders. In 2018, it paid N443.01 billion while it has approved a share buyback of 10 percent of its ordinary shares outstanding of N17.05 billion.
The cement maker has total assets of N1.258 trillion, lower than the market capitalisation of N2.98 trillion. This means the company is sweating its assets in generating higher revenue and profit.
It remains an attractive growth story in the Nigerian cement space, with incrementally larger contribution to gross revenues from its Pan African businesses which provides exceptional portfolio diversification and strong FX earnings potentials.
It continues to enjoy superior margins on account of strong energy efficiency and lower asset maintenance costs.
While the recent stringent policies by the central bank have dampened the outlook for banks, the huge infrastructure deficit is a boon for Dangote Cement and its peer rivals.
The strong infrastructure investment drive of the current administration is positive for cement consumption.
The arguments for cement demand growth in Nigeria are compelling, thus lending credence to our strong cement consumption outlook.
Analysts are betting that low per capita cement consumption estimated at 17 million units, infrastructural stock still below peer countries, unimpressive road network and growing case for concrete road, will add strength to the earnings of operators in the industry.
Nigeria’s housing deficit is estimated at between 17 to 20 million housing units, with potential cost of $22 billion to bridge the gap over a period of 20 years, according to the World Bank.
Dangote Cement’s shares are attractive as it is trading at a price multiple of 7.71 times earnings, as its shares has gained 21.96 since the start of the year.