April 29, 2022/CSL Research
Akin to its peers, Dangote Cement reported a double-digit Revenue growth of 24.2% y/y to N413.2bn in Q1 2022 from N332.7bn in Q1 2021, based on its recently released Q1 2022 results. On a q/q basis, performance was also better compared with Q4 2021, as Revenue was up by 14.3% q/q from N361.5bn in Q4 2021. As the global economic space was disturbed by geo-political tensions, worsened supply chain challenges, and heightened inflation, Dangote Cement also had a fair share, as gas supply to its Nigerian operations was affected, and this impacted its Group volume production (sales volume; down 3.6% y/y to 7.2m MT). Meanwhile, these challenges were amplified on the back of an already low gas generation in its Nigerian operations. Also, production volume in its Pan-African operations was down amidst the global supply chain disruption and rising commodity prices, further exacerbated by the shutdown of its Congo plant for over 2 months and an extended power plant maintenance in its operations in Senegal. In essence, price increments came to the rescue. Specifically, Revenue from the Nigerian operations increased by 34.3% y/y to N321.9bn in Q1 2022, supported by a 36.4% y/y increase in price per tonne, which compensated for the 1.5% y/y decline in volume. On the other hand, for the Pan African region, Revenue decreased by 1.8% y/y to N91.3bn in Q1 2022 owing to a more significant decline in volume (-7.6% y/y) which outweighed the growth in price per tonne (+6.3% y/y).
Growth in Cost of Sales (adjusted for depreciation) tracked that of Revenue growth, up 23.3% y/y (vs. Revenue growth of 24.2%) to N132.7bn in Q1 2022. With the decline in sales volume, it is evident that the firm had to contend with inflationary pressures, energy disruptions and supply chain challenges. The y/y growth in Cost of Sales (adjusted for depreciation) was mainly driven by double-digit upticks in Fuel & Power consumed (+36.3% y/y) and Plant maintenance cost (+86.7% y/y), while Material consumed grew slightly by 2.6% y/y. Still resilient, due to the robust growth in Group Revenue, Gross profit grew by 24.6% y/y to N280.5bn in Q1 2022 from N225.0bn in Q1 2021. Similarly, on a q/q basis, Gross profit rose, up 19.8% from N234.0bn in Q4 2021. Gross margin expanded by 0.2ppt y/y to 67.9% in Q1 2022 from 67.6% in Q1 2021.
Operating Expenses (adjusted for depreciation) rose by 39.4% y/y to N71.06bn in Q1 2022 from N50.96bn in Q1 2021. The growth in Opex reflects the 51.6% y/y and 7.7% y/y growth in Selling & Distribution Expenses (adjusted for depreciation) and Administrative Expenses (adjusted for depreciation), respectively. The 57.5% y/y increase in haulage expenses drove the surge in Selling & Distribution. Besides, the marked effect of a 74.0% y/y fall in Other Income to N1.0bn in Q1 2022 moderated growth in EBITDA to rise by 18.2% y/y to N210.4bn in Q1 2022. Consequently, EBITDA margin contracted by 2.6ppts to 50.9% in Q1 2022 from 53.5% in Q1 2021. Despite the 6.5% y/y rise in Depreciation & Amortisation to N27.9bn, operating performance remained resilient as EBIT grew 20.2% y/y to N182.5bn in Q1 2022.
Net Finance Cost increased, up 22.0% y/y to N26.4bn in Q1 2022 from N21.6bn in Q1 2021. The growth in Net Finance Cost came from a 45.3% y/y increase in Finance Cost to N36.8bn despite a 183.4% y/y increase in Finance Income to N10.4bn. Overall, Pre-Tax profit was up 20.0% y/y to N156.1bn in Q1 2022 from N130.1bn in Q1 2021. Effective tax rate rose to 32.4% in Q1 2022 from 31.0% in FY 2020. Given the 25.4% y/y growth in Tax Expense, growth in Net Income moderated, rising by 17.6% y/y to N105.5bn in Q1 2022 from N89.7bn in Q1 2021. Overall, Earnings per Share settled at N6.18/s in Q1 2022 compared with N5.29/s in Q1 2021.
Our numbers are currently being reviewed. Current price; N287.00/s.
The company will hold a conference call on Thursday, 05 May 2022 at 2:00 pm Lagos time to discuss the results.
Source: Company financials, CSL Research
