March 1, 2024/CSL Research

Dangote Cement’s recently released FY 2023 results showed the company’s Revenue increased by 36.4% y/y, to N2.21tn for FY 2023 from N1.62tn in 2022. Quarterly, performance was resilient, as Revenue was up by 23% q/q to N693.49bn in Q4 2023 from N563.77bn in Q3 2023. Given a 1.75% decrease in sales volumes, we attribute the growth in Revenue to price increases, however, we cannot determine the quantum of the price increase as of the time of writing this report.

In 2023, Cost of sales (adjusted for depreciation) increased by 54.5% y/y to N883.77bn for FY 2023 from N572.13bn in 2022. A significant growth in plant maintenance costs (+62.27% y/y) drove the y/y growth in Cost of Sales (adjusted for depreciation). Increases in materials consumed (41.88% y/y) and fuel and power consumed (+49.80% y/y) also contributed to the increase in Cost of Sales. However, Gross Profit rose by 26.6% to N1.32tn in FY 2023 from N1.05tn in FY 2023. However, gross margin fell by 4.7ppts y/y to 60.0% in FY 2023, down from 64.6% in FY 2022.

Given the current inflationary environment and the persistent Naira depreciation which has negatively impacted operating costs, we saw the company’s Operating Expenses (adjusted for depreciation) rise by 34.0% y/y to N462.99bn in FY 2023 from N345.48bn in FY 2022. The growth in Opex reflects the 22.1% y/y and 92.5% y/y growth in Selling and distribution Expenses (adjusted for depreciation) and Administrative Expenses (adjusted for depreciation), respectively. Other Income rose by 367.9% to N24.95bn in FY 2023. EBITDA increased by 25.4% y/y to N885.43bn in FY 2023 from N706.27bn in FY 2022 but EBITDA margin contracted by 3.5ppts to 40.1% from 43.6% in FY 2022. Despite a 25.6% y/y rise in Depreciation and Amortization to N151.16bn, Operating Profit climbed by 25.3% y/y to N734.27bn in FY 2023 from N585.88bn in FY 2022.

Net Finance Cost increased by 209.4% y/y to N283.56bn in FY 2023 from N91.66bn in FY 2022. The rise in Net Finance cost was driven by a significant increase in Finance Cost, up by 138.52% y/y to N310.96bn in FY 2023 from N130.37bn in FY 2022. The rise in Finance Cost was mainly due to the FX losses the company recorded in 2023 following the Naira devaluation. The company’s FX losses rose by 204.25% to N164.08bn in FY 2023 from N53.93bn recorded in FY 2022 while Finance Income was down to N27.41bn in FY 2023 from N38.72bn in FY 2022.

Pre-tax profit was up by 5.6% y/y to N553.10bn in FY 2023 from N524.00bn in FY 2022. Given a 31.2% y/y decline in Tax Expense to N97.52bn in FY 2023, Net income grew significantly by 19.2% y/y to N455.58bn in FY 2023 from N382.31bn in FY 2022. Overall, Earnings per Share settled at N26.47/s in FY 2023 compared with N22.27/s in FY 2022.

Our estimates are currently under review. Current price; N686.7/s.

Source: Company data, CSL Research

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