Dangote Cement Plc – Huge Pan African loss masks strong domestic numbers in Q1 2020

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CardinalStone Research
Dangote Cement Plc (NGSE: DANGCEM) reported a combined profit after tax (PAT) of N60.6 billion (0.6% YoY) in its Q1’20 unaudited results. Despite a robust performance in Nigeria, growth in joint PAT was pegged back by a more than two-fold increase in after-tax loss to N48.1 billion in the Pan African operations.

Key highlights:

  • Group revenue rose by 3.8% YoY to N249.2 billion in Q1’20, driven by a strong performance in Nigeria. Notably, revenue increased by 5.6% YoY in Nigeria but remained flat at the Pan African operations largely due to a total lockdown of South Africa in March
  • Nigerian revenue growth was supported by a 5.0% YoY increase in average realised price, reduced rebates, and slightly higher volumes (+0.7% YoY). Pan African volumes declined by 2.9% YoY in Q1’20 on the impact of South African lockdown and technical issues in Tanzania
  • Despite the EBITDA margin improvement across Africa (+4.0ppts to 20.9%), the Pan African operations remained margin dilutive to the group. However, EBITDA margin was also 3.3ppts lower YoY at 57.6% in Nigeria (Group: -70bps YoY to 45.8%). The margin pressure in Nigeria was driven by the use of unfavourable fuel mix (expensive gas) and increases in staff salaries
  • The company recorded a N3.8 billion foreign exchange gain following a devaluation of the naira to N386/$ in March from N364/$ previously. This resulted in a material decline in net finance cost to N3.7 billion in Q1’20 from N9.4 billion in Q1’19
  • Higher effective taxes at the Pan African operations, occasioned by losses without direct tax benefits in some countries, left group profit largely flat. Notably, an over two-fold YoY increase in after-tax loss to N48.1 billion in the Pan African operation masked a 34.1% YoY increase in profits in Nigeria
  • Cash balance plunged to N47.3 billion in Q1’20 from N112.1 billion in FY’19, reflecting working capital weakness and a N30.0 billion facility extended to the parent company. Going forward, we expect the firm’s cash coffers to be bolstered by the successful completion of its Series 1 N100 billion bond issuance in April 2020
  • The company revealed that it has obtained SEC approval for the planned share buyback programme
  • A results conference call is scheduled for Wednesday, 27 May 2020 at 12 noon UK/Lagos time
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Dangote Cement Plc - Huge Pan African loss masks strong domestic numbers in Q1 2020 - Brand Spur

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