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May 5, 2022/FSDH Research

Key Performance Highlights:

• Dangote Cement posted a robust 24.2% YoY revenue growth in 1Q22, underperforming its competitor, Bua cement (+58.5% YoY) by a wide margin. The revenue growth was led by Nigeria (+34.3%), while the Pan-Africa (-1.8%) segment declined marginally. The sales growth was powered by the higher average net realized prices, while the company recorded a 3.6% YoY drop in sales volume due to supply chain disruptions and energy supply challenges owing to low supply of gas in Nigeria. Nevertheless,  the demand remained strong across all markets.
   
• The company’s Nigerian operations sold over 4.8Mt of cement during 1Q22. The company exported 213Kt of cement during the period, up 55.0% YoY. When looking at the domestic sales alone, the Nigerian operations sold 4.6Mt, down 3.1% year on year. The slightly lower volume, elevated by the high base of 1Q21, was due to energy supply disruptions that impacted production. In addition, the production was further affected by the global supply chain disruptions and increased global commodity prices. The total sales volume in Nigeria was down 3.6% YoY to 7.2 Mt in 1Q22, while the Cement volume shrank 1.5% YoY to 4.8 Mt in 1Q22. This quarter, the company also continued the production ramp-up at the 3Mta Okpella plant.
   
• The gross profit spurted 26.6% YoY at N259.1 billion in 1Q22, resulting from a relatively lower rise in the cost of sales despite rising inflationary pressures. The group EBITDA margin contracted 250 bps YoY to 51.0% in 1Q22. The total administration and selling expenses vaulted 36.6% YoY in 1Q22, driven by higher haulage expenses, AGO costs, and other general administrative expenses, also affected by inflationary pressure and the foreign currencies conversion to Naira. The administrative costs for the company grew by 7.4% YoY from N15.8 billion to N16.9 billion in 1Q22. The Selling and Distribution expenses spiked 47.8% YoY to N60.7 billion in 1Q22. In comparison, the company’s other income sank 74.0% YoY to N1.0 billion in 1Q22 due to a drop in sundry income, resulting in 20.5% YoY growth in operating profit to N182.8 billion in 1Q22.
   
• The company’s finance income jumped 183.4% YoY to N10.4 billion in 1Q22, offset by a 45.4% YoY rise in finance cost, primarily due to an N18.2 billion foreign exchange loss in 1Q22 against N10.6 billion foreign exchange gain in 1Q21. Consequently, profit before tax was reported at N156.4 billion, a 20.2% YoY growth. Due to a marginal increase in the effective tax rate to 32.3% in 1Q22 compared to 31.0% in 1Q21, the profit after tax stood at N105.9 billion in 1Q22 against N89.7 billion in 1Q21. The earnings per share for the quarter came in at N6.18/share compared to N5.29/share in the prior-year quarter.
   
• Dangote Cement announced the appointment of Ms. Halima Aliko-Dangote as a Non-Executive Director with effect from February 26, 2022. Halima Aliko-Dangote is the Group Executive Director (GED) of Commercial Operations of Dangote Industries Limited (DIL).
   
• Dangote Cement announced the successful completion of its N116 billion Series 2 Fixed Rate Senior Unsecured Bonds, including tranches A, B, and C of 5, 7, and 10-year bonds, respectively, under the company’s new N300 billion Multi-Instrument Issuance Programme. The bonds were issued on April 7, 2022, with the pricing range for the three tranches between 11.35% and 13.00%. The issue proceeds will be used to fund expansion projects, refinance existing short-term debt, and for general corporate purposes.

Market Reaction: Investor reaction to the strong 1Q22 results was restrained as the stock closed unchanged at N292.40 versus a 0.98% gain in the All-Share Index (4/5).

Dangote Cement Earnings Highlight 1Q22

Source: Company Financials, FSDH