Vetiva Bullish on Dangote Cement’s Full Year Performance

Investment analysts at Vetiva Research have said stakeholders should expect an impressive performance from Dangote Cement Plc (DCP) for the year ending December 31, 2017. DCP already recorded a profit after tax of N193 billion for the nine months ended September 30, 2017, showing increase of 44 per cent above the N133.5 billion recorded in the corresponding period of 2016.

Vetiva said results highlighted that DCP reported a 37 per cent rise in revenue to N604 billion and growing its revenue from Drilling down to Nigeria, the Cement giant recorded a 35 per cent year on year (y/y) rise in revenue from its Nigerian operations by 35 per cent to N417 billion.

In a review of the company’s Pan African operations, the Vetiva report indicated that DCP operation revenues grew by 40 per cent to N192 billion amidst price increases and a gradual ramp up in volumes over the nine-month period (eight per cent increase y/y to seven million metric tonnes MT). Quarter on quarter (Q/Q) revenue growth was also modest across the region, up three per cent to N67 billion. “The strong Q3’17 performance from the company’s Pan-African businesses, according to the report, was driven by price increases in South Africa and Ethiopia. Also, revenues were driven by the Congo plant (1.5 million MT) which came onstream as planned and has so far added 5,000 MT to Group’s volumes. Overall, the Group reported a 10 per cent y/y rise in 9M’17 volume to 16.5 million MT,” the report said.

In addition to the top-line revenue growth, the Vetiva report noted that DCP achieved a 64 per cent y/y increase in group EBITDA to N294 billion, driven by persistent strong pricing in Nigeria, positive contributions from Pan-African operations, and continued ramp up in use of coal at Obajana (coal usage 9M’17: 57 per cent vs H1’17: 38 per cent) and Ibese (coal usage 9M’17: 56 per cent vs H1’17: 43 per cent) plants. On a Q/Q basis, Q3’17 EBITDA across Pan-African operations rose five to N13 billion, spurred by cost moderations across plants as well as higher prices across certain regions. The Vetiva report noted that the recent foray of Dangote Industries Limited (DIL) into road construction with cement opens up a fresh avenue to push volumes in Nigeria over the medium to long term.

“AG Dangote Construction Company Limited, a member of DIL, has already launched and completed construction projects such as the Itori-Ibese road and the Obajana-Kabba road as part of the company’s CSR initiatives. Currently, the company, in conjunction with Flour Mills of Nigeria, is carrying out renovations on the Apapa wharf road. Vetiva analysts expect this new arrangement to support volume growth in the near to medium term,” the report said.