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BusinessDay
Nigeria's leading finance and market intelligence news report.

Dangote Cement Nigeria operations continue to power overall business

…as Pan-African operations lag despite revenue surge

The NGN85 billion loss Dangote Cement reported from its Pan African businesses in FY 2019 was the fourth consecutive year since the economic recession of 2016 as its foreign operations continue to struggle to generate profit.

The NSE’s largest company by market capitalization has now posted an accumulated loss position of NGN206.98 from its operation outside of Nigeria since 2016.

One ordinarily expects that the expansion of any company’s operations to other locations is majorly driven by the goals of the firm to achieve increased market share and improved profits. However, this has not totally been the case for Dangote cement as it continues to record losses in company operations outside Nigeria, indicating that the cement giant may re-consider continued expansion to other countries.

However, deeper analysis shows that the Pan-African losses is not a revenue problem, rather, it is caused by excessive borrowings placed on the Pan-African business.

Despite growing Pan-African revenue by 50% in the last 4 years, losses in Dangote cement’s Pan-African operations may be attributed to the heavy finance costs burden with company having paid NGN257.30 billion in finance cost compared to their accumulated revenue of N786.84b from its Pan-African operations since 2016. This finance cost burden leaves a debt service to revenue ratio of almost 33 percent on Pan-African business compared to a local DSR of 5.3 percent with finance cost only at N118b compared to accumulated local revenue of around N2.2 trillion.

Meanwhile, analysis now point to the fact that the operations of the cement manufacturer in Nigeria has been solely responsible for the decent growth the company has enjoyed in the past few years. The company as group has generated revenue in excess of NGN3 trillion and profit after tax (PAT) of NGN937.95 billion in the last 4 years.

In 2016, Dangote cement posted NGN426.13 billion and NGN195.03 billion in revenue from Nigeria and Pan-Africa respectively, but posted an impressive NGN317.38 billion in Nigeria and a disappointing NGN21.01billion in losses from Pan-African operations. The cement manufacturer in FY 2016 recorded group revenue of NGN615.10 billion and PAT of NGN142.86 billion after excluding central administrative and elimination costs.

However, in 2017 Dangote cement posted NGN552.36 billion and NGN258.44 billion in revenue from Nigeria and Pan-Africa respectively, but posted NGN265.53 billion in Nigeria and a disappointing NGN12.77 billion in losses from Pan-African operations. The cement manufacturer in FY 2017 recorded group revenue of NGN805.58 billion and PAT of NGN204.25 billion after excluding central administrative and elimination costs.

In 2018 Dangote cement posted NGN618.30 billion and NGN283.26 billion in revenue from Nigeria and Pan-Africa respectively, but posted an impressive NGN491.62 billion in Nigeria and a disappointing NGN87.90 billion in losses from Pan-African operations. The cement manufacturer in FY 2018 recorded group revenue of NGN901.21 billion and PAT of NGN390.33 billion after excluding central administrative and elimination costs.

Dangote cement for FY 2019 posted NGN610.25 billion and NGN282.71 billion in revenue from Nigeria and Pan-Africa respectively, but posted NGN275.15 billion in Nigeria and a disappointing NGN85.29billion in losses from Pan-African operations. The cement manufacturer in FY 2019 recorded group revenue of NGN891.67 billion and PAT of NGN200.52 billion after excluding central administrative and elimination costs.

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