Africa’s largest Cement producer Dangote Cement has published its Financial year 2020 audited reports after the close of trade the Nigerian Stock Exchange (NSE) Tuesday. The group delivered impressive earnings as Profit after Tax rose by 37.7% y/y to NGN276.07 billion in FY-20 while Earning per share grew by 36.9% to N16.14. The board has proposed a final dividend of NGN16.0 (same as in the prior year), which implies a dividend yield of 7.3% based on the last closing price of NGN220.00.
Dangote Cement’s Nigerian operations during the period sold 15.9Mt for the full year 2020, compared to 14.1Mt in 2019. This includes both cement and clinker sales, which implies a 12.9 per cent growth for the full year 2020. Looking at the domestic sales alone, Nigerian operations sold 15.6Mt, up by 14.3 per cent year on year and resulting in an increase in market share.
Revenues for the Nigerian operations increased by 18.0% to N720.0 billion, owing to demand in the domestic market. This volume growth was enhanced by a successful innovative national consumer promotion “Bag of Goodies – Season 2” and lower rains in the third quarter compared to the previous year.
The Nigerian business recorded a strong Earnings before interest, taxes, depreciation and amortization (EBITDA) of N421.4 indicating a margin of 59%.
Dangote Cement posted a record high Pan-African EBITDA of N71.3 billion, which went up by 49.0%. Within the period under review, the cement group commissioned its gas power plant in Tanzania. Group earnings per share was up by 36.9% to N16.14.
Dangote Cement recorded strong performance not only at the top line but also at the bottom line, owing to cost saving measures. Despite inflationary pressures and foreign exchange volatility, disciplined cost control measures enabled the company to maintain a relatively flat cash cost per tonne. The cost control measures include improved plant efficiency, better fuel mix and general overhead optimization
Chief Executive Officer, Dangote Cement Plc, Michel Puchercos, in his comments on the results, said: “2020 was a good year for Dangote Cement across board. Several firsts made 2020 a productive year such as our maiden clinker shipment, maiden bond issuance and successful buyback programme. We increased our capacity by 3Mt in Nigeria, commissioned our two export terminals and commissioned our gas power plant in Tanzania. All these were achieved whilst we focused on protecting our people, customers and communities from the impact of the pandemic.
“I am delighted to report that Dangote Cement experienced its strongest year in terms of EBITDA and strongest year in terms of volumes. Despite a challenging environment, Group volumes for the year were up 8.6% and Group EBITDA was up 20.9%.
“Looking ahead, we have strengthened our Alternative Fuel initiative which focuses on leveraging the circular economy business model and reducing exposure of our cost base to foreign currencies fluctuations. We continue to embed Dangote Cement’s 7 sustainability pillars into every aspect of our operation and culture.
“We remain committed to keeping safe our staff and communities by being fully compliant with health and safety measures in all our territories of operation. We are focused on adapting to the rapidly evolving markets in which we operate.”
Dangote Cement has a long-term credit rating of AA+ by GCR and Aa2.ng by Moody’s due to its market leading position, significant operational scale and strong financial profile evidenced by the company’s robust operating and net profit margins relative to regional and global peers, adequate working capital, satisfactory cash flow and low leverage.
The group’s aggregate revenue grew by 16.0% y/y to NGN1.03 trillion in FY-20, driven by revenue improvement from its Nigerian operations (+18.0% y/y) and Pan African operations (+12.7% y/y). The topline growth in Nigeria was driven by volumes (+12.9% y/y to 15.9MMT) compared to the increase in price per tonne (+4.5% y/y). On Pan African Operations, the translation impact arising from the Nigerian naira’s devaluation was the primary catalyst behind the topline expansion of 12.7% y/y, as sales volumes rose by 4.4% y/y to 9.9MMT.
Further down, earnings received a boost from the moderation in net finance cost (-71.7% y/y) in FY-20. This was supported by the blend of the higher interest income (+73.2% y/y), a foreign exchange gain of NGN16.63 billion in FY-20, which was absent in FY-19, and the high base finance cost in FY-19 due to foreign exchange losses of NGN13.48 billion. Adjusting for the impact of the FX gain in FY-20 and FX loss in FY-19, net finance cost would have declined by 15.8% y/y in FY-20.
Overall, PBT grew by 49.0% y/y in FY-20 with related PBT margin improving by 8.0ppts to 36.0%, on the back of the moderation in net finance cost and gains from cost management. Following a higher tax charge (NGN97.24 billion in FY-20 vs NGN49.96 billion in FY-19), PAT grew slower by 37.7%.
Dangote Cement Plc is sub-Saharan Africa’s largest cement producer with an installed capacity of 45.6Mta across 10 African countries and operates a fully integrated “quarry-to-customer” business with activities covering manufacturing, sales and distribution of cement.
