WED, APRIL 25 2018-theG&BJournal-DANGCEM published Q1-18 result this Tuesday, showing revenue and net profit grew by 16.3% y/y and 23.9% q/q respectively. Q1-17 tax charge and consequently, net profit, were restated for easy comparison. On the unadjusted numbers, the latest net profit is lower by only 1.2%.
Compared to Q1-17, group volume grew by only 3% while price was higher by 13%. Non-Nigerian volume was flat, while average price was higher by 8% y/y. DANGCEM Management had said it would raise prices outside Nigeria, specifically in Ethiopia, to offset the impact of last year’s devaluation.
A marginal 5% volume increase was also achieved in Nigeria (recall that LAFARGE’s Nigerian volume contracted by 5% y/y in Q1-18), with y/y price differential now 8% (vs. 55% average in Q1-Q4 2017), as low base-effect almost completely wanes. The achieved group revenue beat our estimate by 10%.
Gross margin grew by 197 bps y/y and 506 bps q/q to 59.8% at group level, but behind 62% estimate. EBIT margin also increased by 288 bps y/y and 769 bps q/q. Non-Nigerian gross margin increased significantly, both on y/y and q/q bases, reflecting mainly the impact of the price increase (although per unit production cost was lower q/q).
In Nigeria, gross margin was higher by 113 bps y/y (on favourable pricing), but declined by a marginal 14 bps q/q. Per tonne cost in Nigeria was the same as in Q4-17, but lower by 2% y/y.
Opex-to-revenue ratio declined by 104 bps y/y and 359 bps q/q to 17%. The ratio was much lower in Nigeria (14%) but higher abroad (25%), wherein start-up costs are still substantial. Overall, group opex grew by 9.6%.
Net finance income stood at NGN4.6 billion, vs. -NGN5.9 billon in Q1-17 and -NGN3.8 billion in Q4-17. The net finance income is the group’s first since Q2-16, supported by a net exchange gain of NGN12.5 billion, driven mainly by higher naira exchange rate and the resultant in gains on intergroup assets.
Group effective tax rate came in at 33.5%, higher than the recomputed 28% for Q1-17, but lower than the 84% rate recorded in Q4-17. Tax was again provided for the new lines awaiting pioneer approval in Nigeria, resulting in effective tax rate of 30%, although below the one-time Q4-17 rate of 84% (comprising provisions for Q1-Q3 also).
