October 22, 2018/Cordros report
DANGCEM just published 9M-2018 results with Group Q3-18 EBITDA growing by a marginal 0.7% y/y while net profit was lower by 8% y/y. Revenue grew by 6% y/y on 10% increase in sales volume.
- For the three months ended September, gross margin was 130bps lower y/y (dragged by non-Nigerian operation), opex margin higher by 256bps y/y (due to Nigerian operation), while net finance cost increased by 10% y/y (coming also from non-Nigeria).
- For 9M-18, revenue and PAT grew by c.14% and c.3% vs. 9M-17. Annualized, both are tracking behind consensus’ 2018FY estimates by 2% and 13% respectively.
Breaking down Q3-18 result across the Group’s operations:
- Nigerian operation recorded revenue (2% y/y), EBITDA (0.4%), and PAT (24% y/y) growth. Earnings was supported significantly by the growth in net finance income (302% y/y). The positives from Nigeria are (1) volume growth (6% y/y), higher gross margin (389bps y/y), and lower finance cost (-21% y/y), while the negative is the significant increase in both operating expenses and the margin (47% and 711bps y/y respectively).
- Non-Nigerian revenue (14% y/y) and EBITDA (c.3% y/y) grew while loss after tax increased (230% y/y). Earnings was negatively impacted by the significant increase in net finance cost (302% y/y). Also impacting the result is the decline in gross margin (751bps y/y).
Comment: The current y/y decline in quarterly earnings marks the Group’s third in a row. We think this might impact trading in the stock today, more so with annualized profit trailing consensus’ at double-digit. Our estimates are under review.
| Consolidated | Nigeria | Pan Africa | ||||||||||
| Income Statement (N’bn) | 30-Sep-18 | y/y ∆ | Q3-18 | Q3 y/y | 30-Sep-18 | y/y ∆ | Q3-18 | Q3 y/y | 30-Sep-18 | y/y ∆ | Q3-18 | Q3 y/y |
| Revenue | 685.29 | 13.5% | 202.85 | 6.3% | 471.33 | 13.3% | 127.23 | 2.0% | 213.96 | 14.1% | 75.62 | 14.3% |
| Cost of sales | -287.68 | 10.7% | -90.09 | 9.5% | -129.26 | 6.1% | -34.10 | -10.9% | -158.42 | 14.7% | -55.99 | 27.2% |
| Gross profit | 397.61 | 15.7% | 112.76 | 3.8% | 342.07 | 16.2% | 93.14 | 7.7% | 55.54 | 12.5% | 19.63 | -11.4% |
| Operating expenses | -64.83 | 23.9% | -23.45 | 19.3% | -46.31 | 37.0% | -15.88 | 67.8% | -18.52 | 0.0% | -7.57 | -25.8% |
| Other income | 4.52 | 54.9% | 1.98 | 16.2% | 2.88 | 107.4% | 0.84 | 5.5% | 1.64 | 7.3% | 1.14 | 25.5% |
| EBITDA | 337.30 | 14.6% | 91.29 | 0.7% | 298.64 | 14.0% | 78.09 | 0.4% | 38.66 | 19.3% | 13.20 | 2.7% |
| Dep & amort. | -70.44 | 15.2% | -24.95 | 18.9% | -37.23 | 13.0% | -13.86 | 28.1% | -33.21 | 17.6% | -11.09 | 9.0% |
| Operating profit | 266.86 | 14.5% | 66.34 | -4.7% | 261.41 | 14.2% | 64.23 | -4.1% | 5.45 | 30.8% | 2.11 | -21.4% |
| Finance income | 10.62 | -60.6% | 7.03 | -32.8% | 76.63 | 43.2% | 36.60 | 128.8% | -66.01 | 148.6% | -29.56 | 435.7% |
| Finance costs | -30.12 | -24.6% | -11.55 | -25.5% | -16.65 | -31.9% | -6.72 | -21.4% | -13.47 | -13.0% | -4.83 | -30.6% |
| Profit before tax | 247.36 | 12.3% | 61.83 | -4.3% | 321.40 | 24.5% | 94.10 | 26.5% | -74.04 | 95.5% | -32.28 | 229.6% |
| Income tax expense | -89.09 | 34.9% | -16.71 | 7.8% | -91.13 | 38.0% | -18.20 | 36.8% | 2.04 | -4096.1% | 1.49 | -167.5% |
| Profit for the period | 158.28 | 2.7% | 45.11 | -8.1% | 230.28 | 19.9% | 75.91 | 24.3% | -72.00 | 89.9% | -30.79 | 156.7% |
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| Owners of Company | 157.71 | 2.7% | 45.18 | -8.1% | 230.28 | 19.9% | 75.91 | 24.3% | -72.57 | 88.9% | -30.72 | 157.1% |
| Volume | 17.77 | 7.6% | 5.41 | 10.2% | 10.76 | 11.7% | 2.95 | 6.2% | 7.01 | 1.9% | 2.46 | 15.5% |
