FSDH Initial Reaction: Dangote Cement 2Q23 results 
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August 1, 2023/FSDH

Key Performance Highlights:

• On 29 July 2023, Dangote Cement reported strong 2Q23 results. The total revenue spurted 37.8% YoY to N544.1 billion in 2Q23 (2Q22: N394.9 billion). The revenue growth was led by Pan Africa (+123.9%) and supported by Nigeria’s 12.3% revenue increase during 2Q23. The total sales volume stood at 7,151 kilotonnes in 2Q23, a marginal 2.8% YoY increase from 6,957 kilotonnes in 2Q22. Out of the total sales volume, the volume of the Nigerian operation remained almost flat, with a marginal 0.9% YoY decline to 4,466 kilotonnes in 2Q23. Pan-African volumes grew 14.3% YoY to 2,800 kilotonnes in 1Q23, owing to robust demand.
   
• The gross profit vaulted 43.4% YoY to N324.7 billion in 2Q23 (2Q22: N226.5 billion). The group EBITDA margin expanded 561 bps YoY to 46.7% in 2Q23. The selling and distribution costs were up by 13.3% to N84.5 in 2Q23 due to increased haulage expenses. The administrative costs for the Company grew 55.9% YoY to N26.8 billion in 2Q23, mainly due to higher bank charges and staff costs. The Company’s other income was up 16.4x to N9.6 billion in 2Q23 from N584 million in 2Q22 due to an increase in sundry income. Consequently, the Company witnessed a 64.9% YoY increase in operating profit to N223.2 billion in 2Q23. The Company’s operating margin increased 675 bps YoY to 41.0% in 2Q23.
   
• Dangote Cement’s finance income dropped by 50.7% YoY to N5.7 billion in 2Q23, while finance cost was up 66.5%% YoY to N26.7 billion in 2Q23. The Company also witnessed a 4.6x rise in net exchange loss in foreign-denominated transactions to N103.8 billion from N22.4 billion in 2Q22. Consequently, profit before tax was reported at N93.0 billion, a 14.2% YoY decrease. Due to a lower effective tax rate of 25.7% in 2Q23 compared to 38.9% in 2Q22, the profit after tax increased 4.3% YoY to N69.1 billion in 2Q23 against N66.3 billion in 2Q22. The group earnings per share came in at N3.95 in 2Q23 versus N3.92 in 2Q22 (1Q23: N6.44).
   
• On a sequential basis, the revenue in 2Q23 was up 33.8% QoQ to N544.1 billion, while the cost of sales increased 34.1% QoQ to N219.4 billion in 1Q23. The selling and distribution expenses increased 23.0% QoQ to N84.5 billion, while the finance costs were up 17.5% QoQ to N26.7 billion in 2Q23. Due to a sudden rise in exchange loss on FX-denominated transactions, the net profit declined 36.9% QoQ to N69.1 billion in 2Q23 (1Q23: 109.5 billion). The Company’s operating margin expanded by 245 bps, and the EBITDA margin expanded by 53 bps QoQ. However, the net margin contracted significantly by 1422 bps QoQ in 2Q23.
   
• On 27 July 2023, Dangote Cement approved the appointment of Mr. Alvaro Poncioni Mérian as Independent NonExecutive Director to the Board.

Market Reaction: Investor’s reaction to the 2Q23 results was subdued as the stock remained unchanged at N352.00 versus a 1.10% loss for the All-Share Index (31/7).

Dangote Cement Earnings Highlight 2Q23

Source: Company Financials, FSDH