CardinalStone Research
Cement Company of Northern Nigeria Plc (CCNN: TP 12.97) filed its 9M’19 results on the stock exchange late Friday. The company recorded an over two-fold YoY surge in earnings after tax that was largely driven by increased volumes.
Some positives:
- We note the strong growth in revenue in Q3’19 (+38.5% YoY), buoyed by a ramp-up in volumes as capacity utilization increased at the Kalambiana plant. In addition to this, industry cement price was increased by an average of N150/bag in April 2019, providing further support to top-line in Q2’19 and Q3’19.
- Net cash flow from operations improved to N14.6 billion in 9M’19 from the N10.9 billion in H1’19. The improvement on this front was primarily supported by cash proceeds from sales of cement in Q3’19.
- The company’s result implies a debt to equity ratio of 0.1% compared to 18.5% for Lafarge
Some concerns:
- Gross margin declined by 2.8 ppts to 39.5% in Q3’19 on higher energy cost.
- We are concerned by the acceleration of distribution cost (+81.7% YoY), which was significantly ahead of sales growth in Q3’19. On the back of this, operating margin declined by 8.1 ppts YoY to 19.5% in the three month period
- EPS came in significantly lower at N0.67/share (-78.9% YoY), reflecting the earnings dilutive impact of the CCNN and Kalambaina merger
9M’19 results
