Dangote Cement performance lures investors

Dangote Cement Plc has a vision to “be Africa’s leading cement company, respected for the quality of our products, for our service and for the way we conduct our business.” Similarly, the company’s mission is to “deliver strong returns to shareholders by selling high-quality products as affordable prices, backed by excellent customer service.”

Dangote Cement, which accounts for about 31 percent of the market capitalization of the Nigerian Stock Exchange has shown its determination to realize that vision and mission since its listing on the exchange. Although the company has suffered its own rough patch due to the challenging operating environment, on the average, it has performed well to the admiration and satisfaction of many shareholders and many stakeholders.

The company has posted impressive results over the years and is set to deliver another improved performance at the end of the current financial year, going by its results for the half-year period ending June 30, 2017.

The past performance and bright future prospects probably provide increased incentive for investors to buy into the cement company last week.

Half-year financial results

According to unaudited results, Dangote Cement posted a revenue of ₦412.7 billion (US$1.31 million), up by 41.2 percent from ₦292.2 billion (US$926.5 million) in the corresponding period of 2016.
Production cost of sales rose from ₦139.2 billion (US$441.3 million) to ₦177 billion (US$561.2 million), while administrative expenses grew marginally from ₦19 billion (US$60.2 million) to ₦20.9 billion (US$66.3 million).
Sales and distribution expenses rose by 39 percent from ₦37.2 billion (US$) to ₦51.8 billion (US$), while finance cost rose by 46 percent to ₦24.4 billion (US$117.9 million), compared with ₦16.7 billion (US$53 million) in 2016.

Dangote Cement ended the half-year period (H1) with profit before tax of ₦155.5 billion (US$493 million), showing an increase of 24 percent from ₦124.8 billion (US$395.7 million) in 2016.
Profit after tax grew faster by 39 percent to ₦144 billion (US$456.6 million), from ₦103 billion (US$326.6 million ) in the corresponding period of 2016.

Analysts’ assessment

Commenting on the second quarter(Q2) results, analysts at Cordros Capital Limited, said revenue rose 34.8 percent, earnings before interest tax, depreciation and amortization (EBITDA) rose by 67.5 percent, and profit after tax 45.1 percent.
According to Cordros Capital, revenue was ahead of their estimate by 3.9 percent while profit after tax lagged by 9.3 percent.

In their own assessment of the H1 performance, analysts at WSTC Financial Services Limited said Dangote Cement Plc delivered a robust top line performance in H1, driven entirely by series of price increases effected during the period as well as in the 2nd half of 2016 in reaction to elevated input cost.
Revenue soared by 41 percent to ₦412.7 billion (US$1.31 million) in H1 this year from ₦292.2 billion (US$926.5 million) in the first half of 2016, despite a 22 percent decline in volume sold in Nigeria to 6.85 million metric tonnes from 8.77 million metric tonnes as the higher pricing dampened demand during the period.

New investors

Apparently seeing the prospects in Dangote Cement Plc, investors purchased a 2.3 percent stake in the company for ₦86.1 billion (US$273 million) last week. The sale involved 416 million shares that was consummated in 6 off market deals on the Nigerian Stock Exchange.
South Africa’s Public Investment Corporation (PIC) had bought 1.5 percent for US$289.3 million in 2013, while Sovereign fund Investment Corp of Dubai (ICD) acquired 1.4 percent for US$300 million in 2014.

Commenting on the transaction, a leading stockbroker, Mr. David Adonri said it as good development for both the company and the Nigerian economy.

“As you are aware, Dangote Cement is a multinational entity. It is capable of eliciting global interest. New investment whether local or foreign can be viewed from the perspective that the company is performing very well and that the Nigerian economy is providing it with necessary enabling environment,” he said.

With this sale of 2.3 percent, the holdings of Dangote Industries Limited in the cement subsidiary have reduced to 88.63 percent from 90.93 percent as at last February.

Source: This Day