August 1, 2023/CSL Research
Dangote Cement reported a double-digit increase in Revenue by 17.7% y/y to N950.8bn in H1 2023 from N808bn in H1 2022 based on its recently released H1 2023 results. On a q/q basis, performance was impressive, as Revenue was up 33.8% q/q to N544.1bn in Q2 2023 from N406.7bn in Q1 2023. We attribute the growth in Revenue to an increase in the company’s production levels, which was up by 9% in Q2 2023 from what was reported in Q1 2023.
Cost of Sales (adjusted for depreciation) was up by 18.2% y/y to N332bn in H1 2023. The y/y growth in Cost of Sales (adjusted for depreciation) was mainly driven by other production expenses (79% y/y). Also, marginal increases in fuel & power consumed (+5.9% y/y) and Plant maintenance cost (+16.6% y/y) contributed to the rise in Cost of Sales. Gross profit increased by 17.4% y/y to N618.8bn in H1 2023 from N527.1bn in H1 2022. Similarly, on a q/q basis, Gross Profit increased by 32% to N352bn in Q2 2023 from N266.7bn in Q1 2023. Gross margin shrunk by 0.25% y/y to 65.1% in H1 2023 from 65.2% in H1 2022.
Operating Expenses (adjusted for depreciation) rose by 19.4% y/y to N186.5bn in H1 2023 from N156.2bn in H1 2022. The growth in Opex reflects the 16.8% y/y and 30.2% y/y growth in Selling & Distribution Expenses (adjusted for depreciation) and Administrative Expenses (adjusted for depreciation), respectively. Other Income rose by 590.6% to N11bn in H1 2023. EBITDA increased by 18.9% y/y to N443.2bn in H1 2023. Consequently, EBITDA margin grew by 1.02% to 46.6% in H1 2023 from 46.1% in H1 2022. Despite a 15.4% y/y rise in Depreciation & Amortisation to N63.2bn, EBIT increased by 19.5% y/y to N380bn in H1 2023.
Net Finance Cost increased by 164.2% y/y to N33.2bn in H1 2023 from N12.57bn in H1 2022. While Finance Cost was up 42.9% y/y to N49.4bn, Finance Income was down by 26% y/y to N16.2bn. We note that the recent devaluation of the Naira led to a steep 179.5% increase in FX losses to N113.6bn. This dragged Pre-Tax profit down by 9.4% y/y to N239.8bn in H1 2023 from N264.8bn in H1 2022. We note that the company is currently enjoying a tax holiday, thus we saw a 34% y/y decrease in Tax Expense, growth in Net Income improved, rising by 3.8% y/y to N178.60bn in H1 2023 from N172.1bn in H1 2022. Overall, Earnings per Share settled at N10.39/s in H1 2023 compared with N10.10/s in H1 2022.
We have a BUY recommendation with a target price of N372.49 for Dangote Cement. Current price; N352.00/s.
Source: Company data, CSL Research
