Dangote Cement: improved revenue, profit yield robust dividend payout to shareholders   

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By Kayode Tokede

Dangote Cement Plc declared an all-round impressive performance in revenue and profitability that leverages on growth in dividend payout to shareholders who invested in the cement manufacturing company.

The impressive performance in profitability leveraged on company’s dividend payout, the highest dividend payout to shareholders by listed cement manufacturing company on The Nigerian Stock Exchange.

Dangote Cement continued to face price competition in Nigeria and some African countries where it operates, but its pan-African sales volumes was up by 8.4 per cent backup by stronger performances in Cameroon, Ethiopia and Sengal.

Despite numerous challenges, the company for audited result and accounts for December 2017 proposed a dividend of N10.50 (N178.9 billion) per share in contrast with N8.50 per share paid in 2016

The group reported 21,915,000 tonnes of Cement volume in 2017  from 23,575,000 tonnes in 2016 over 15.9 per cent decline in cement volume in Nigeria.

Cement sales volume dropped to 12,724,000 tonnes in 2017 from 15,128,000 tonnes in 2016 while Pan Africa reported 8.4 per cent sales volumes in 2017 to 9,365,000 tonnes as against 8,639,000 tonnes in 2016.

Consequently, Dangote Cement revenue rose by 31 per cent to N805.58 billion from N615.1 billion reported in 2016, driven by 26 per cent and 32.5 per cent revenue generation in Nigeria and Pan African countries.

Dangote Cement in 2017 operated in Ethiopia, Senegal, Tanzania, Zambia,  South Africa and Ghana, among others.

The improved performance was based on significant growth in revenue and assets quality as the cement manufacturing company total assets hits N1.67 trillion threshold.

The group continued to strengthen its business network across Africa (South Africa, Ethiopia, Tanzania, Congo, Cameroon, Senegal, Zambia, Ghana) with Nigeria leading the business frontline.

Dangote cement for the financial year ended December 31, 2017 showed significant increase in revenue, and significant growth in total operating expenses/ finance cost to highlight economic headwinds faced in most African countries last year.

As the group expends its business across Africa, its Total equity improved by nearly 24 per cent due to improved retained earnings that gained 7.7 per cent  to N781.26 billion in 2017 from N677 billion reported in 2016.

From the financial statement, Dangote Cement balance sheet emerged stronger with better financial structure and improved liquidity.

Improved revenue that impacted on profits

Dangote Cement recorded appreciable improvements in both underlying and actual profit and loss items. Substantial growths in revenue and profits translated to significant increase in basic earnings per share.

351,290        8.5      323,816

Production cost of sales (COS) increased by 8.5 per cent from N323.8 billion in 2016 to N351.29 billion in 2017, to position 56 per cent marginal growth in gross profit from N291.3 billion in 2016 to N454.29 billion reported in 2017.

Therefore, the proportion of revenue/COS stood at 43.6 per cent in 2017 from 52.6 per cent in 2016.

Total operating expenses however rose by 30.1 per cent to N155.3 billion from N119 billion reported in 2016.

The breakdown of total operating expenses indicated that selling and administrative expenses rose by 53.5 per cent to N109.9 billion from N82.7 billion while administrative expenses gained 36.7 per cent from N36.7 billion to N45.38 billion in 2017.

Therefore, Operating Profit gained 66.7 per cent to N304 billion in 2017 from N182.49 billion in 2016.

Finance cost leapt high to N52 billion in 2017 from N45.38 billion in 2016 with an average effective interest rate on funds borrowed generally is 13.26per cent and 13.07per cent  per annum for Group and Company respectively. (2016: 13per cent per annum for both Group and Company).

For the year under consideration, Dangote Cement profit before tax rose by 60per cent from N180.9 billion in 2016 to N289.6 billion on the backdrop of increase in finance cost and growing operating expenses.

With about N85 billion tax income in 2017 from N5.7 billion reported in 2016, Profit after tax increased by 9.4  per cent to N204 billion from N186.6 billion reported in 2016.  Impact of Tax changes on Dangote Cement revleaed that the company is confident that pioneer applications will be approved by NIPC. Pioneer tax relief taken for the two-year extension on lines 1 and 2 Ibese and Line 3 Obajana. Pioneer tax relief not taken for the original three-year application on lines 3 & 4 Ibese and Line 4 Obajana.

Earnings per share thus moved from N11.34 in 2016 to N11.65 in 2017.

Profitability indices remained stronger in 12-month ended December 2017. Profit margin moved from 29.4 to 35.9 per cent while return on equity moved from 25.7 per cent to 26.1per cent.

Return on total assets stood at 17.4 per cent from 11.8 per cent in 2016.

 

Stronger financing structure in assets, equity

Dangote Cement’s total assets increased by 8.9 per cent to N1.67 trillion from N1.5 trillion reported in 2016.

Long-term assets increased by about 2.4 per cent from N1.2 trillion to N1.26 trillion while current assets rose by 35.3 per cent to N410.3 billion to N303 billion.

Total liabilities also gained 10.1per cent to N884.5 billion from N803.58 billion reported in 2016.

Current liabilities closed 2016 at N525.7 billion as against N520.5 billion in 2016 as long-term liabilities moved from N277 billion in 2016 to N364 billion in 2017, representing an increase of 31.1 per cent.

Shareholders’ funds grew by 7.7per cent to N781.36 billion from N725 billion 2016.

Meanwhile, the proportion of equity funds to total assets dropped from 47.4 per cent to 46.9 per cent.

 

Maintaining a stronger liquidity

Dangote Cement emerged with stronger liquidity. Current ratio, which measures the financial agility of a company by relating current assets to relative liabilities, improved from 0.8 times  in 2017 from 0.6 times in 2016.

Points to note

Despite the macro economic headwinds, Dangote Cement has proposed a dividend of N10.50. Market analysts lauded consistent dividend payment to shareholders by the management of Dangote cement.

The cement industry before now had suffered a setback due to economic instability from fiscal revenue shortfall and heightened political activities which re-channelled liquidity from the productive activities to electioneering spending.

With a peaceful transition in government, it tends to provide huge opportunity for cement companies with Dangote Cement positioned as market leader.

Nigerian NewsDirect is optimistic on the company’s improved revenue and potential growth in shareholders return going forward as federal government 2018 N9.3 trillion budget is focused on Infrastructure spending that is expected to revive economic growth.

Following an expansion exercise that has seen it embarking on a pan African investment drive, Dangote Cement is planning a production target of at least 54 million metric tonnes by the end of 2018.

Dangote Cement is Africa’s leading cement producer with nearly 46Mta capacity across Africa.

A fully integrated quarry-to-customer producer, with a production capacity of 29.25Mta in Nigeria market.

The company’s Obajana plant in Kogi state, Nigeria, is the largest in Africa with 13.25Mta of capacity across four lines; Ibese plant in Ogun State has four cement lines with a combined installed capacity of 12Mta and Gboko plant in Benue state has 4Mta.

Dangote Cement has eliminated Nigeria’s dependence on imported cement and has transformed the nation into an exporter of cement serving neighbouring countries.

In addition, we have operations in Cameroon (1.5Mta clinker grinding), Congo (1.5Mta), Ghana (1.5Mtaimport), Ethiopia (2.5Mta), Senegal (1.5Mta), Sierra Leone (0.5Mta import), South Africa (2.8Mta), Tanzania (3.0Mta), Zambia (1.5 Mta).

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