FSDH Initial Reaction: Dangote Cement 1Q24 results 
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April 26, 2024/FSDH Research

Key Performance Highlights:

• Dangote Cement Group posted solid 1Q24 results, with Sales volume up across all regions. The uptick in the Nigerian economy resulted in a 26.1% YoY rise in sales volumes to 4.6MT in the Nigeria region, and improved sales from Congo, Zambia, and Ghana led to a 3.1% YoY rise to 2.7MT in the Pan Africa region. Dangote Cement’s revenues more than doubled to N817.3 billion in 1Q24 from N406.7 billion in 1Q23, driven by strong volume growth, equally supported by price increases in line with inflationary realities. Pan-African revenues increased nearly 3.0x to N381.3 billion, while Nigerian revenues surged 61.6% YoY to N452.9 billion in 1Q24 (before removing inter-company sales).
   
• The Cost of Sales soared 143.3% YoY to N398.2 billion during the quarter, primarily due to higher fuel and power consumption. This impacted the gross margin, which declined to 51.3% from 59.8% in 1Q23. Gross Profit jumped 72.5% YoY to N419.2 billion in 1Q24. Moreover, Administrative Costs rose 143.8% YoY to N45.5 billion, and Selling and distribution expenses surged 111.4% YoY to N145.3 billion. This rise was driven by an increase in haulage expenses due to the significant rise in AGO costs and partly by Inflationary pressure and the devaluation of foreign currencies. Other Income increased to N27.5 billion in 1Q24 from N1.5 billion in 1Q23, while impairment of financial assets rose to 648 million in 1Q24 from N269 million in 1Q23. Subsequently, Operating Profit increased 62.7% YoY to N255.3 billion, while Operating margin contracted 733 bps YoY to 31.2%.
   
• Group EBITDA jumped to N309.5 billion in 1Q24, up 66.6% YoY, supported by Nigeria EBITDA increasing 41.8% YoY to N224.9 billion and Pan Africa EBITDA remarkably increasing 220.4% YoY to N99.8 billion. Nevertheless, the EBITDA margin contracted to 37.9% from 45.7% in 1Q23. Further, Dangote Cement’s Net Finance Cost rose significantly to N111.8 billion from N22.0 billion primarily due to higher exchange loss and interest expense & other finance costs, partly offset by increased interest-earning balance. Gain on monetary assets increased to N22.9 billion from N12.0 billion in 1Q23. The Company paid an effective tax rate of 32.3% in 1Q24, higher than 1Q23’s 25.4%, and Tax expense increased to N53.7 billion in 1Q24 from N37.3 billion in 1Q23. The elevated cost pressures, increased borrowing costs, and a further currency weakening managed to pull down the profit for the period, increasing just 2.9% YoY to N112.7 billion in 1Q24 Vs. N109.5 billion in 1Q23. EPS increased to N6.68 Vs. N6.44 in 1Q23.
   
• Looking at the sequential performance, revenues were up 17.9% QoQ to N817.3 billion, with Gross Profit coming in at N419.2 billion, up 27.0% QoQ. Operating Profit showcased significant growth of 47.3% QoQ to N255.3 billion. However, Profit for the year decreased by 36.7% QoQ, with EPS declining to N6.68 from N10.37 in 4Q23.
   
• During the quarter, the Company emphasized exports, dispatching 7 ships from Nigeria to Ghana and Cameroon. As a result, Nigerian exports surged by 87.2%, reflecting its expanding presence in regional markets and capitalizing on the export-to-import strategy.

Market Reaction: Investor’s reaction to the 1Q24 results was muted as the stock remained unchanged at N656.70 versus a 0.02% marginal loss for the All-Share Index (26/4).

Dangote Cement Earnings Highlight 1Q24

Source: Company Financials, FSDH