October 25, 2024/CSL Research

Dangote Cement’s recently released unaudited results for the first nine months of 2024 showed a remarkable Revenue increase of 69.1% y/y, rising to N2.56 trillion from N1.51 trillion in the same period of 2023. However, on a q/q basis, Revenue declined by 15.1%, reaching N800.52 billion in Q3 2024, down from N942.71 billion in Q2 2024. This significant y/y Revenue growth can be attributed to a combination of increased prices and higher sales volume. Specifically, prices surged by 65.9% to N123,854 per ton in 9M 2024, compared to N74,655 per ton in 9M 2023. Meanwhile, sales volume increased by 1.9% to 20.67 million metric tons in 9M 2024, up from 20.29 million metric tons in the prior year. The q/q decline in Revenue is attributed primarily to adverse weather conditions, which dampened demand during the quarter. Consequently, sales volumes decreased by 2.21%, totaling 6.74 million metric tons in Q3 2024.

In 9M 2024, the Cost of Sales (adjusted for depreciation) rose by 97.2% y/y, increasing to N1.10 trillion from N560.06 billion in the same period of 2023. This increase was primarily driven by a significant rise in plant maintenance costs (+128.65% y/y). Other contributing factors included increases in production expenses (+122.97% y/y), fuel and power consumed (+109.37% y/y), and materials consumed (+76.47% y/y). Despite these rising costs, Gross Profit grew by 52.5% y/y, reaching N1.10 trillion in 9M 2024, up from N560.07 billion in 9M 2023. However, the Gross Margin declined by 6.2 percentage points, falling to 56.9% in 9M 2024 from 63.0% in 9M 2023.

Source: Company data, CSL Research

Given the current inflationary environment and the persistent depreciation of the Naira, which have negatively impacted operating costs, the company’s Operating Expenses (adjusted for depreciation) rose by 89.86% y/y, increasing to N584.75 billion in 9M 2024 from N307.99 billion in 9M 2023. This increase is largely due to an 87.8%y/y growth in Selling and Distribution Expenses (adjusted for depreciation) and a 97.6% y/y rise in Administrative Expenses (adjusted for depreciation).

Other Income, encompassing insurance claims, government grants, and other miscellaneous sources, surged by 123.3% to N37.15 billion in 9M 2024. EBITDA increased by 37.0% year-on-year to N907.71 billion from N662.76 billion in 9M 2023. However, the EBITDA margin contracted by 8.3 percentage points to 35.48% from 43.8% in 9M 2023.

Despite a 54.6% y/y rise in Depreciation and Amortization, which reached N157.31 billion, Operating Profit climbed by 33.8% y/y to N750.40 billion, up from N561.01 billion in 9M 2023.

Net Finance Cost surged by 149.1% y/y to N422.09 billion in 9M 2024, up from N169.43 billion in 9M 2023. This increase was primarily driven by a substantial rise in Finance Costs, which grew to N451.29 billion from N190.10 billion. The spike in Finance Costs is largely attributed to foreign exchange (FX) losses stemming from the further devaluation of the Naira and increased interest expenses. FX losses rose by 124.3% to N222.08 billion, compared to N99.02 billion in 9M 2023. Meanwhile, Finance Income also saw an increase, reaching N29.13 billion from N20.67 billion.

Pre-tax profit showed a modest y/y increase of 0.4%, rising to N406.39 billion in 9M 2024 from N404.89 billion in 9M 2023. Tax expenses rose slightly by 0.04% to N127.29 billion, leading to a 0.6% y/y increase in Net Income, which reached N279.10 billion, up from N277.55 billion. Earnings per Share (EPS) was N16.55 in 9M 2024, compared to N16.08 in the prior year.

Following a recent price retracement, we have updated our recommendation for the stock. Previously rated as a SELL, the stock now presents an upward potential of 7.06% from our price target of ₦512.62 per share. Accordingly, we have revised our rating from SELL to HOLD. Current Price: N478.8 per share.

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​​​​​​​​​Dangote Cement H1 2024 Quick Take.pdf