Dangote Cement is inches away from becoming the first quoted Nigerian firm to hit the N1 trillion revenue mark.
The largest producer of the building material posted 11.9 percent year on year (yoy) growth in revenue to N901.21 billion in December 2018, largely driven by the 11.4 percent growth in Nigerian volumes to 14.18 metric tonnes, and better per tonne prices in Pan-Africa (+11.3% yoy to an average price of N32,126/ton).
Analysts at Chapel Hill Denham Ltd expect revenue to increase by 14.6 percent yoy to N1.03 trillion by the end of 2019, on the back of their 6.3 percent yoy group volume growth forecast to 25.08 metric tonnes and higher effective pricing.
Dangote Cement has been leveraging on the country’s huge infrastructure deficit to grow earnings and maximize the wealth of shareholders.
“We believe that the newly signed Executive Order 7 for Road Infrastructure Development as well as management’s strategy to grow the export business (plans to export $600mn worth of cement in FY-19E) is positive for Nigeria volume growth,” said analysts at Chapel Hill Denham Ltd.
An efficient energy mix has helped bolster margins.
Dangote Cement’s gross margins increased to 57.46 percent in December 2018 from 56.40 percent the previous year. Net profit margin moved to 43.31 percent in December 2018 as against 25.35 percent as at December 2017.
The company’s net cash from operating activities of N375.34 billion as at December 2018 shows it has the financial strength to pay its debt, reward shareholders in form of dividend and fund future expansion plans.
It has spent N131.04 billion on the acquisition of property plant and equipment on optimism of a pickup in economic activities.
The Cement sector expanded faster than the broader economy last year, growing at 4.5 per cent while the country’s Gross Domestic Product (GDP) increased by 1.9 per cent. Between 2013 and 2015 before Nigeria entered a recession, Cement recorded 30 per cent growth per annum, outpacing the economy’s 5 per cent growth.
In addition to opportunities in the sector, Dangote Cement has been able to keep cost down, saving energy costs and leveraging on its Pan-African outreach to lessen exchange rate pressures.
Accounting for 71 per cent share of sales volume among listed cement makers- Lafarge and Cement Company of Northern Nigeria (CCNN) – which are part of the biggest players in Nigeria’s cement market Dangote has been able to grow its capacity and maintain dominance in the industry.
Dangote Cement’s three plants in Nigeria (Obajana, Ibese and Gboko) have a capacity of 29.3Mta, about 61 per cent share of total installed capacity among the listed cement makers. Across Africa as at the end of 2017, the cement maker has 45.6M t/a and is the 10th largest cement producer globally.
The race for the N1 trillion marks may not be as easy as it sounds for Dangote Cement should MTN Nigeria go ahead with its planned listing on the Nigerian Stock Exchange (NSE) this year.
MTN Nigeria, the biggest telecommunications service provider with 65.57 million subscribers grew its revenue from N887 billion in 2017 to N1.03 trillion in 2018, promising an interesting tussle as history beckons on both companies.
Bala Augie Segun Adams Ameachi
