TUE 01 MARCH, 2022-theGBJournal- Dangote Cement Plc (DANGCEM) published its 2021FY audited financials today, reporting growth of 29.1% y/y in Q4-21 standalone PAT with EPS growth of 28.6% y/y to N5.00, bringing 2021FY EPS to NGN21.24 (+31.6% y/y).
The company’s 2021FY EPS was slightly ahead of our estimate of NGN20.67 but below Bloomberg’s consensus estimate of NGN24.81. The board has proposed a final dividend of NGN20.0/s (an increase of 25.0% from NGN16.0/s in 2020FY), implying a dividend yield of 7.3% based on the closing price of NGN273.50 (February 28).
The group’s aggregate revenue grew by 32.5% y/y in Q4-21 (2021FY: +33.8% y/y), driven by broad-based expansion across its Nigerian (+43.0% y/y) and Pan African (+10.6% y/y) operations. For Nigerian operations, the revenue growth in Q4-21 was driven mainly by higher price per tonne (+28.7% y/y) compared to volumes (+11.1% y/y to 4.47MMT).
Analysts at Cordros Research notes that sales volumes in Nigeria grew stronger by 16.8% y/y in 2021FY (2020FY: +12.9% y/y), reflecting continued gains from the pick-up in activities in the real estate sector, led by individual homebuilders.
On Pan-African operations, the translation impact arising from the devaluation of the Nigerian naira combined with the increase in sales volumes (+8.9% y/y to 10.66MMT) drove the increase in 2021FY revenue (+24.2% y/y). Overall, the group’s sales volume expanded by 13.8% y/y to 29.27MMT in 2021FY.
Group EBITDA grew by 39.4% y/y in Q4-21 (2021FY: +43.5% y/y), as the topline growth (32.5% y/y) overshadowed the increases in the cost of sales ex-depreciation (+22.9% y/y) and operating expenses ex-depreciation (+30.7% y/y).
Similarly, the EBITDA margin rose by 2.3ppts to 46.8% in Q4-21 (2021FY: +3.3ppts to 49.4%). The expansion in the group’s 2021FY EBITDA margin was buoyed by the substantial increment in price per tonne in Nigerian operations (+18.1% y/y), which neutered pressures emanating from cash cost/tonne (+38.9% y/y in 2021FY).
In addition, margins received a boost from the improvement in OPEX/sales ratio (16.7% in 2021FY vs 18.3% in 2020FY).
Net finance cost surged by 217.1% y/y to NGN44.94 billion in 2021FY, following the increase in finance cost (+49.4% y/y to NGN65.71 billion) amidst the decline in finance income (-30.4% y/y to NGN20.77 billion).
The finance cost growth reflects the impact of higher gross debt (+17.0% y/y to NGN577.96 billion) and FX loss of NGN8.76 billion in 2021FY, which was absent in 2020FY. On the other hand, the reduction in finance income was due to the absence of FX gains in 2021FY compared to NGN16.63 billion in 2020FY.
Overall, PBT grew by 31.1% y/y in Q4-21 (2021FY: +44.2% y/y). Following the significant increase in tax charge (+37.5% y/y in Q4-21 I 78.9% y/y in 2021FY), PAT grew slower by 29.1% y/y in Q4-21 (2021FY: +31.9% y/y).
‘’We are impressed that DANGCEM exerted its pricing power in the Nigerian cement market,’’ says Cordros Research analyst.
‘’This, alongside gains from operational efficiencies, enabled the company to achieve a record EBITDA of NGN683.25 billion in 2021FY- the highest delivered since inception. We also like the increase in DPS during the review period more so that the company recently completed tranche II of the share buyback programme in January 2022.’’
They expect the momentum in private sector demand for cement to moderate in 2022FY, given the substantial hike in cement prices.
‘’In addition, we believe electioneering activities will also weigh on public sector demand, particularly in H2-22.’’
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