July 26, 2024/CSL Research
Dangote Cement’s recently released unaudited results for the first half of 2024 show a significant Revenue increase of 85.1% y/y, rising to N1.76 trillion from N950.83 billion in the same period of 2023. The company’s quarterly performance was also strong, with Revenue increasing by 15.3% quarter-on-quarter, reaching N942.71 billion in Q2 2024, up from N817.35 billion in Q1 2024. This substantial Revenue growth is attributed to a combination of price and volume increases. Although the specific extent of the price increase is not detailed in this report, it is noted that sales volume grew by 3.83% to 13.93 million metric tons in H1 2024 from 13.42 million metric tons in H1 2023.
In H1 2024, the Cost of Sales (adjusted for depreciation) increased by 122.5% y/y, rising to N738.79bn from N332.03bn in H1 2023. This growth was primarily driven by a significant increase in plant maintenance costs (+141.54% y/y). Additionally, increases in fuel and power consumed (+138.71% y/y) and materials consumed (+95.40% y/y) contributed to the higher Cost of Sales. Despite these cost increases, Gross Profit climbed by 65.00% y/y, reaching N1.02tn in H1 2024, up from N618.8bn in H1 2023. However, Gross Margin fell by 7.1 ppts y/y, dropping to 58.00% in H1 2024 from 65.1% in H1 2023.
| Source: Company data, CSL Research |
Given the current inflationary environment and persistent Naira depreciation which have negatively impacted operating costs, the company’s Operating Expenses (adjusted for depreciation) rose by 105.92% y/y, increasing to N384.13bn in H1 2024 from N186.54bn in H1 2023. This increase reflects a 103.9% y/y growth in Selling and Distribution Expenses (adjusted for depreciation) and a 113.3% y/y rise in Administrative Expenses (adjusted for depreciation).
Other Income, which includes insurance claims, government grants, and other miscellaneous sources, grew by 161.9% to N28.96bn in H1 2024. EBITDA increased by 50.1% y/y to N665.18bn from N443.26bn in H1 2023. However, the EBITDA margin contracted by 8.8 ppts to 37.8% from 46.6% in H1 2023.
Despite a 79.7% y/y rise in Depreciation and Amortization to N113.58bn, Operating Profit climbed by 45.1% y/y to N551.60bn from N380.04bn in H1 2023.
Net Finance Cost increased by 109.6% y/y to N307.72bn from N146.84bn in H1 2023. This rise was driven by a significant increase in Finance Cost, which grew by 103.94% y/y to N332.52bn from N163.05bn. The increase in Finance Cost is attributed to FX losses resulting from the further devaluation of the naira. FX losses rose by 77.16% to N201.30bn from N113.63bn in H1 2023. Finance Income on the other hand, also increased to N24.80bn from N16.21bn.
Pre-tax profit increased by 22.1% y/y to N292.96bn from N239.86bn. Tax expenses grew by 68.2% to N103.05bn, leading to a 6.3% y/y increase in Net Income to N189.90bn from N178.60bn. Earnings per Share settled at N11.26 in H1 2024, compared with N10.39 in H1 2023.
We have a target price of N480.48/s for Dangote Cement with a SELL recommendation. Current price; N656.7/s.
Kindly click on the below link to download the full report.
Dangote Cement Quick Take H1 2024.pdf
