February 27, 2023/CSL Research
Dangote Cement Plc reported an increase in Revenue of 17% y/y to N1.62trn in FY 2022 from 1.38trn recorded in 2021. On a q/q basis, Revenue was up by 19.5% to N441.07bn in Q4 2022 from N369.22bn in Q3 2022. However, as of writing, the management is yet to provide details of the drivers of the company’s strong performance in FY 2022, but we believe this growth in Revenue could be attributed to increase in prices, amidst a decline in production volumes as the company seeks to protect its profit margin. As of 9M 2022, prices were up by (+28.1% y/y), while production volumes declined by (-4.7% y/y).
Cost of Sales (adjusted for depreciation) rose faster than Revenue, up 20.4% y/y (vs. Revenue growth of 17%) to N572.13bn in FY 2022 from N475.07bn in FY 2021. Gross margin marginally declined by 1.0ppts from 65.7% to 64.6% for FY 2022. The rise in production cost of sales was driven mainly by uptick in raw materials cost and cost of energy. Also, we believe that several headwinds like inflationary pressures and the constant FX depreciation significantly impacted the company’s cost of sales. Operating Expenses (adjusted for depreciation) was up 49.4% y/y to N345.48bn in FY 2022 from N231.20bn in FY 2021. The increase was driven by both Administrative Expenses adjusted for depreciation (up to N71.52bn from N57.68bn in 2021) and Selling & Distribution Expenses adjusted for depreciation (up to N273.96bn from N173.52bn in 2021).
Consequently, EBITDA rose 3% to N706.04bn in FY 2022 from N683.60bn in FY 2021 while EBITDA margin declined by 5.8ppts uptick to 43.6% in 2022. Despite a 19.5% rise in depreciation, EBIT closed marginally higher in 2022 by 0.5% from N582.83bn to N585.65bn.
Net Finance Cost rose by 39.4% y/y to N62.633bn in 2022 from N44.94bn in 2021. This is as a result of an increase in Interest Income (+86.4% y/y to 38.72bn in 2022) amidst a stronger increase in Interest Expense which was up by 98.4% y/y to N130.37bn in FY 2022. Pre-Tax profit declined marginally by 2.8% y/y to N523.02bn in FY 2022 from N537.89bn in 2021.
A significant decline in Tax Expenses to N141.69bn in FY 2022 from N173.93bn in FY 2021 was enough to protect profit margins as Net Income increased by 4.8% y/y to N381.33bn in FY 2022 from N363.93bn in FY 2021. Earnings per share was up 4.8% y/y to N22.27/s for FY 2022 from N21.24/s in FY 2021. The management declared a dividend of N20/s for 2022 with the qualification date slated for 30 March 2023.
We have a target price of N372.49 for Dangote Cement with a BUY recommendation on the stock. Current Price; N272/s
| Dangcem FY 2022 | ||||||
| Nm, except mentioned otherwise | FY’22 | FY’21 | y/y | Q4’22 | Q3’22 | q/q |
| Sales | 1,618,323 | 1,383,637 | 17.0% | 441,067 | 369,219 | 19.5% |
| Cost of Sales (Ex-Dep) | (572,133) | (475,065) | 20.4% | (150,526) | (140,734) | 7.0% |
| Gross Profit | 1,046,190 | 908,572 | 15.1% | 290,541 | 228,485 | 27.2% |
| Other Income | 5,333 | 6,221 | -14.3% | 2,218 | 1,514 | 46.5% |
| Selling and Distribution Expenses (ex-dep) | (273,959) | (173,518) | 57.9% | (75,772) | (72,694) | 4.2% |
| Administrative Expenses (ex-dep) | (71,521) | (57,677) | 24.0% | (26,170) | (14,622) | 79.0% |
| EBITDA | 706,043 | 683,598 | 3.3% | 190,817 | 142,683 | 33.7% |
| Depreciation and Amortization | 120,390 | 100,766 | 19.5% | 38,427 | 27,191 | 41.3% |
| EBIT | 585,653 | 582,832 | 0.5% | 152,390 | 115,492 | 31.9% |
| Net Finance Income/ (Cost) | (62,633) | (44,942) | 39.4% | 6,068 | (44,492) | -113.6% |
| Profit before tax | 523,020 | 537,890 | -2.8% | 158,458 | 71,000 | 123.2% |
| Tax expense | (141,691) | (173,927) | -18.5% | (18,892) | (30,013) | -37.1% |
| Net Profit | 381,329 | 363,963 | 4.8% | 139,566 | 40,987 | 240.5% |
| Net income attributable to equity holders | 382,311 | 364,439 | 4.9% | 139,429 | 40,997 | 240.1% |
| Diluted EPS | 22.27 | 21.24 | 4.8% | 8.20 | 2.31 | 255.1% |
| Margins: | FY’22 | FY’21 | y/y | Q4’22 | Q3’22 | q/q |
| Gross margin | 64.6% | 65.7% | -1.0ppts | 65.9% | 61.9% | 4.0ppts |
| EBITDA Margin | 43.6% | 49.4% | -5.8ppts | 43.3% | 38.6% | 4.6ppts |
| PBT Margin | 32.3% | 38.9% | -6.6ppts | 35.9% | 19.2% | 16.7ppts |
| Net margin | 23.6% | 26.3% | -2.7ppts | 31.6% | 11.1% | 20.5ppts |
Source: Company data, CSL Research
