FSDH Initial Reaction: Dangote Cement 1Q23 results 
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May 3, 2023/FSDH

Key Performance Highlights:

• On 28 April 2023, Dangote Cement reported lukewarm 1Q23 results. The total revenue declined by 1.6% YoY to N406.7 billion in 1Q23 (1Q22: N413.2 billion), primarily due to a 12.9% YoY revenue decline in Nigeria, significantly offset by robust growth in Pan Africa (+38.5% YoY). The sales growth was driven primarily due to price increases to offset heightened inflation. The total sales volume stood at 6,270 kilotonnes in 1Q23, a 13.5% YoY decline from 7,248 kilotonnes in 1Q22. Out of total sales volume, the volume of the Nigerian operation declined 24.7% YoY to 3,642 kilotonnes in 1Q23, mainly due to a cash crunch and negative sentiments around the elections. Pan-African volumes grew 8.8% YoY to 2,627 kilotonnes in 1Q23, owing to robust demand, particularly from Senegal, Congo and Zambia.
   
• The gross profit decreased 6.2% YoY to N243.1 billion in 1Q23 (1Q22: N259.1 billion), resulting from a rise in the cost of sales due to increased plant maintenance costs and a rise in fuel & power consumed due to increasing energy costs, especially AGO and coal. The group EBITDA margin contracted 519 bps YoY to 46.1% in 1Q23. The selling and distribution costs were up by 13.2% to N68.7 in 1Q23, driven by increased haulage expenses. The administrative costs for the company grew 10.3% YoY to N18.7 billion in 1Q23, mainly due to higher bank charges and staff costs. The company’s other income was up 45.2% YoY to N1.5 billion in 1Q23 from N1.0 billion in 1Q22 due to an increase in sundry income. Ultimately, the company witnessed a 14.2% YoY slump in operating profit to N156.9 billion in 1Q23. The company’s operating margin contracted 567 bps YoY to 38.6% in 1Q23.
   
• The company’s finance income rose marginally by 1.1% YoY to N10.5 billion in 1Q23, while finance cost fell 11.6% YoY to N32.5 billion in 1Q23, primarily due to lower foreign exchange loss in 1Q23. Consequently, profit before tax was reported at N146.8 billion, a 6.1% YoY decrease. Due to a lower effective tax rate of 25.4% in 1Q23 compared to 32.3% in 1Q22, the profit after tax increased 3.4% YoY to N109.5 billion in 1Q23 against N105.9 billion in 1Q22. The group earnings per share came in at N6.44 in 1Q23 (1Q22: N6.18).
   
• On a sequential basis, the revenue in 1Q23 was down 7.8% QoQ to N406.7 billion, while the cost of sales dropped 8.6% QoQ to N163.8 billion in 1Q23. Although the selling and distribution expenses decreased 16.6% QoQ to N68.7 billion, the finance costs jumped significantly by 752.7% QoQ to N32.5 billion in 1Q23. Consequently, the net profit declined 35.3% QoQ to N109.5 billion in 1Q23. However, the company’s margins improved in 1Q23 on a QoQ basis (except for the net margin), with the operating margin expanding by 405 bps and the EBITDA margin expanding by 246 bps, respectively. However, the net margin contracted significantly by 1144 bps in 1Q23.
   
• On 27 April 2023, Dangote Cement approved the retirement of Mr. Michael Davis from the Board of Directors, effective 13 April 2023.

Market Reaction: Investor’s reaction to the 1Q23 results was subdued as the stock remained unchanged at N270.00 versus a 0.20% fall in the All-Share Index (2/5).

Dangote Cement Earnings Highlight 1Q23

Source: Company Financials, FSDH