October 27, 2023/CSL Research
Dangote Cement’s recently released 9M 2023 results showed Revenue increased by 28.7% y/y, to N1.51tn in 9M 2023 from N1.18tn in 9M 2022. On a quarterly basis, Revenue was up marginally by 3.6% q/q to N563.77bn in Q3 2023 from N544.11bn in Q2 2023. Given a 2.7% y/y decrease in production volumes, we attribute the growth in Revenue to price increases, however, we cannot determine the extent of the price increase at the time of writing this report.
In 9M 2023, Cost of sales (adjusted for depreciation) increased by 32.8% year on year to N560.06bn. A significant growth in other production expenses (86.51% y/y) drove the y/y growth in Cost of Sales (adjusted for depreciation). Increases in plant maintenance costs (+34.32% y/y) and fuel and power consumed (+28.91% y/y) also contributed to the increase in Cost of Sales. Gross profit climbed by 26.3% y/y to N954.54bn in 9M 2023, up from N755.65bn in 9M 2022. However, on a quarterly basis, Gross Profit fell by 4.6% to N335.74bn in Q3 2023 from N352.09bn in Q2 2023. Gross margin was down 1.2% y/y to 63% in 9M 2023, down from 64.2% in 9M 2022.
Given the current inflationary environment and persistent Naira depreciation which has negatively impacted operating costs, we saw the company’s Operating Expenses (adjusted for depreciation) rise by 24.23% y/y to N327.06bn in 9M 2023 from N263.28bn in 9M 2022. The growth in Opex reflects the 22.2% y/y and 45% y/y growth in Selling and distribution Expenses (adjusted for depreciation) and Administrative Expenses (adjusted for depreciation), respectively. Other Income which comprises of Insurance claims, Government grants, and Sundry income rose by 434% to N16.64bn in 9M2023 from N3.12bn in 9M 2022. EBITDA increased by 28.5% y/y to N662.76bn in 9M 2023 from N515.59bn in 9M 2022. EBITDA margin remained constant at 43.8% in 9M 2023. Despite a 24.1% y/y rise in Depreciation and amortization to N101.75bn, EBIT climbed by 29.4% y/y to N561bn in 9M 2023 from N433.62bn in 9M 2022.
Net Finance Cost increased by 178% y/y to N70.41bn in 9M 2023 from N25.33bn in 9M 2022. While Finance Cost was up 68.15% y/y to N91.08bn, Finance Income was down by 28.32% y/y to N20.67bn. Pre-tax profit was up by 20.5% y/y to N404.89bn in 9M 2023 from N335.90bn in 9M 2022. We saw a slight increase of 3.7% y/y in Tax Expense. Net Income grew by 30.2% y/y to N277.55bn in 9M 2023 from N213.10bn in 9M 2022. Overall, Earnings per Share settled at N16.08/s in H1 2023 compared with N12.41/s in H1 2022.
We note that Dangote Cement successfully completed Tranche I of its second share buyback program in July, repurchasing 0.71% of outstanding shares. This brings the total number of outstanding shares to 16,841 from 16,883 as at 9M 2022.
We have a BUY recommendation with a target price of N428.36/s for Dangote Cement. Current price; N310.10/s.
Source: Company data, CSL Research |
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Dangote Cement Quick Take 9M 2023.pdf
