…The EPS print was underpinned by the stellar revenue (+36.4% y/y) growth and a moderation in tax expenses (-31.2% y/y)
…Net finance cost spiked by 209.4% y/y in 2023FY
FRI, MAR 01 2024-theGBJournal| Dangote Cement Plc (DANGCEM) published its 2023FY audited financials today, reporting an EPS of N26.47 (2022FY: N22.27).
The EPS print was underpinned by the stellar revenue (+36.4% y/y) growth and a moderation in tax expenses (-31.2% y/y) amid the higher net finance cost (+209.4% y/y) incurred in the period.
The Board of the cement manufacturer has proposed a final dividend per share of N30.00, implying a dividend yield of 4.4% based on the last closing price of N686.70/s (29 February).
The group’s aggregate revenue grew by 36.4% y/y to N2.21 trillion in 2023FY, underpinned majorly by strong sales across the Pan African (+123.2% y/y) and Nigerian (+7.7% y/y) markets.
The marked expansion in Pan African sales was driven by the sturdy demand in Senegal, Congo, Zambia, and Ethiopia, as the region contributed 41.2% to group’s sales volume (+1.8% y/y to 27.28MMT).
Notably, Pan African operations recorded volume expansion (+12.7% y/y to 11.25MMT) with the Senegal and Ethiopia plants now at full capacity, while the Cameroon plant is close to full capacity.
On Nigerian operations, Dangote Cement revenue growth in 2023FY was solely driven by cement price increases (+17.2% y/y) as demand-inhibiting headwinds (cash crunch, general elections, and heavy rainfall) during the review period triggered volume compression (-8.1% y/y to 16.39MMT).
”DANGCEM’s sales performance in the Pan African region was remarkable and we like the business’ resilience in ensuring profitability in the face of slow sales in its Nigerian operations amid inflationary and currency pressures,” says Cordros Research in their comment on the performance of the cement maker
Gross margin contracted by 467bps to 60.0% in 2023FY (2022FY: 64.6%), undermined by sustained growth in cost of sales ex-depreciation (+54.5% y/y) during the period. Predictably, the higher cost of sales was driven by a surge in fuel & power (+49.8% y/y) and raw materials (+41.9% y/y) costs, reflective of the challenging business environment due to the accelerating inflationary pressures and energy prices.
The group’s operating expenses ex-depreciation increased by 34.0% y/y in 2023FY due to a 27.6% y/y increase in haulage expenses (c. 66.8% of the total OPEX) amid a 45.8% y/y rise in salaries and related staff costs. Consequently, the group’s EBIT (-295bps) and EBITDA (-354bps) margins declined to 33.3% and 40.1%, respectively, in 2023FY.
As expected, net finance cost spiked by 209.4% y/y in 2023FY, driven by higher FX losses (+304.2% y/y to N164.08 billion) and interest expenses (+92.2% y/y to N146.89 billion), and a lower finance income (-29.2% y/y to N27.41 billion).
The increased interest expense highlights the impact of the higher average effective interest rate on borrowed funds (+566bps y/y to 17.3%) and gross debt (+38.4% y/y to N1.01 trillion).
Nevertheless, PBT grew by 5.6% y/y to N553.10 billion in 2023FY, supported by the gains in the group’s monetary assets (N101.16 billion) in the hyperinflationary economies of Ethiopia, Sierra Leone, and Ghana.
Following the lower tax charge (-31.2% y/y) in 2023FY, PAT rose by 19.2% y/y to N455.58 billion.
Cordros Research envisage that Pan African sales will maintain its uptrend For 2024FY, while higher cement prices will remain the key driver of turnover in Nigerian operations.
”Furthermore, we point to DANGCEM’s costs controlling efforts, including fuel mix optimisation, shifting towards alternative fuels and gradual transition from diesel delivery trucks to full Compressed Natural Gas (CNG) trucks and believe these initiatives will help sustain margins in the near term.”
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