… Net income up 91.8 l% in 2018
THUR, FEBRUARY 28 2019-theG&BJournal- Dangote Cement Plc, the largest producer of the building materials in Africa’s largest economy announced strong net profit margin increase for the year ended December 2018 to 43.31 percent from 25.31 percent the previous year influenced by an income tax credit of N89.51 billion that helped add impetus to bottom line.
The relevant tax authority gives tax relief to a firm that incurs qualifying capital expenditure on the basis period. Usually these are firms that have assets that are located in economically disadvantaged areas.
“In prior years, we made a tax provision on profits earned from Ibese production lines 3 & 4 and Obajana production line 4 on the basis that they were yet to obtain approval for tax exemptions under the Pioneer Status Incentive. Approval was obtained in December 2018 and the provision was reversed,” the company said in notes accompanying the earnings result.
Dangote cement’s profit after tax spiked by 91.08 percent to N390.25 billion in December 2018 from N204.25 billion the previous year, but pre-tax profit grew at a slower space.
But its operations elsewhere in the continent recorded a loss of N12.77 billion to end 2017 financial year.
Sales were up by 11.87 percent to N901.21 billion in the period under review while cement production and bagging stood at 45.55 million metric tonnes.
Cement production volumes also stood at 22.79 million metric tonnes ad at December 2018. Analysts are of the view that Nigeria’s huge infrastructure deficit will be a major driver of cement volume.
President Muhammadu Buhari presented a budget of N8.83 trillion, the one of the nation’s biggest spending plan yet, with almost a third of it going into roads, rail, ports and power.
Analysts at Afrivest Securities Ltd said the cement sector felt the pangs of weak economic performance at a devastating level because the sector mainly tracks the performance of the economy as well as government policies and reforms and spending on infrastructure.
The cement sector, which accounts for 0.80 percent (N576.60 billion) of the real GDP as of full year 2018, has seen moderate growth at an average of -0.10 percent in the past three years compared to 16.90 percent in the preceding decade, according to analysts at Afrivest Securities Ltd.
Dangote cement is spending less to produce each unit of revenue as cost of sales ratio fell to 42.53 percent in December 2018 from 43.60 percent the previous year as the company continues to intensify on its energy mix strategy.
Earnings from before interest and taxation (EBIT) otherwise known as profit from operations was up 11.33 percent to N338.18 billion while gross profit increased by 14 percent to N517.90 billion in the period under review.
Dangote Cement’s share price was flat to close at N192.50 while market capitalization stood at N3.28 trillion.
‘’The pioneer status of line 3 of our Obajana plant expired in 2017. In determining the tax liability, the Directors have exercised the right of election in line with the commencement rule in Part IV of CITA 2004 which implies that the Company will be assessed on an actual year basis for tax. This may result in a higher effective tax rate for the 2020 Financial Year,’’ according to the company.
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