Post-tax profit of Dangote Cement Plc, Nigeria’s most-capitalized company, grew 5.4 percent for six the months to June 30, 2019, buoyed by a 50 percent decline in income tax expense, the company said Monday.
Profit after tax rose to N119.2 billion in the review period, from N113.2 billion in the same period last year, despite a three percent decline in revenue, the company said in a statement to Nigerian Stock Exchange.
Proceeds from sale of cement dipped 3 percent to N467.6 billion, compared with N482.3 billion reported a year earlier, while receipts from the sale of other products contracted some 19 percent to N126 million. Sales volume also pared slightly by 0.66 percent to 12.3 million tonnes.
“The numbers are mixed and fairly impressive,” said Ambrose Omordion, Chief Research Officer at Lagos-based InvestData Consulting Limited by telephone.
“The fact that the company was able to manage its tax pay out was the saving grace, otherwise it would have moved to a loss position,” he added.
Gross margin of the cement maker dropped to 58.7 percent in the review period, from 59.04 percent a year earlier as the company’s revenue contracted more than direct production cost which tanked 2.2 percent.
Earnings before interest and tax (EBIT) dipped 15 percent driven by higher operating expenses (selling & distribution plus administrative), which surged 21 percent, reducing EBIT margin by 5.1 percent.
Meanwhile, the rout on NSE has pushed a number of stocks to fresh lows and the cement giant is no exception, as its shares are trading at their lowest price in more than two years.
With its price-to-earnings ratio at 7.32, investors are willing to pay about seven for each naira earnings compared with competitor – Cement Company of Northern Nigeria (CCNN) Plc trading 4.7 times.
“The market is unresponsive to the numbers churned out by companies because liquidity is low,” Omordion said, adding that the low price of equities is a boon for bargain hunters.
Finance cost and income were down by some 9 percent and 29 percent respectively to N19.6 billion and N4.6 billion, slightly elevating net borrowing cost by 0.19 percent.
The substantial decline in tax expense helped strengthen net margin by 2 percent, which consequently elevated earnings per share by 6 percent. This means that the cement giant kept N255 as profit from each thousand naira earned in revenue in the first half of 2019, compared with N235 last year.
Between a six-month period spanning between December 31, 2018 and June 30, 2019, the cement maker’s total assets depreciated some 2 percent or N380 billion spurred by a decline in the value of current assets.
Current assets, which are the company’s liquid assets that can be converted to cash within one year, dipped some 13 percent, driven by cash and bank balances which nearly halved to N93 billion.
The company improved on its performance in its cash flow statements as net cash generated from operating activities jumped 9 percent to N213 billion in the review period.
The principal activity of the Company and its subsidiaries is to operate plants for the preparation, manufacture and distribution of cement and related products.
Its production activities are undertaken at Obajana town in Kogi State, Gboko in Benue State and Ibese in Ogun state, all in Nigeria.
Dangote Cement stock traded flat at N170 per share at the close of market in Lagos on Monday. The stock has lost year to day 10 percent of its value, marginally outperforming the benchmark index, which has lost 11 percent yearlong.
