Dangote Cement Plc, the largest Cement producer with nearly 48.6Mta capacity across Africa, published nine-month results, showing a strong 34.2 percent and 49.1 percent year-on-year growth in revenue and profit before tax to N1.02trillion and N405.5billion, respectively.
Despite the relatively heavy rains, which undermined concrete works in Nigeria between July and September 2021, Dangote Cement managed to grow volumes through the season, with Cement sales from Nigerian operations growing 18.7 percent to 14.1 million tonnes in the period.
Sales from Nigerian operations represented 63.5 percent of the Group’s 22.2 million tonnes cement volume in the nine-month period, although sales from Nigerian plants were barely 58.3 percent of its annual domestic capacity of 32.25 million tonnes.
The increasing use of cement for road construction, in line with Dangote Cement’s decade-long campaign, seems to be paying off, in addition to the gradual recovery of the Nigerian real estate and construction sectors, which grew 2.8 percent and 2.4 percent, respectively in the first half of the year.
The Group Chief Executive Officer, Michel Puchercos, while commenting on the results, noted Dangote Cement’s investment in Alternative Fuel Project, which aims to leverage the waste management solutions to generate energy, is at an advanced stage, with the target of reducing carbon emissions and sourcing more materials locally to hedge the impact of exchange rate volatility.
The higher diesel cost, which affected freight cost and Naira’s weakness in the year, impacted foreign currency-related costs, thus increasing the sales and administrative costs by 16.3 percent year-on-year to N185.5 billion. Nonetheless, the Group’s EBITDA (earnings before interest, tax, depreciation, and amortisation) margin improved to 50.4 percent, compared to 46.2 percent in 2020 full year, reflecting the resilient operating margins of the Nigerian operations, which is rated the most profitable amongst regional peers.
Despite this, Dangote Cement continues to face stiff competition in Ghana, where it has barely a 6.6 percent market share and remained a fringe player but continues to dominate markets like Congo and Cameroon where it ramped up market share to 53 percent and 33 percent, respectively.
The shares of Dangote Cement have remained stable at N280.00 per share, following the announcement of the approval of the Securities and Exchange Commission (SEC) on the renewal of its Share Buyback programme.
With a market capitalisation of N4.77 trillion, Dangote Cement is valued at P/E of 12.9x and EBITDA multiple of 9.3x, a discounted valuation. Given its dividend of N16.00 per share, the stock trades at a dividend yield of 5.7 percent.
While the stock seems to have been resilient at N280.00 per share, the highest price in the past 52 weeks, it has also traded as low as N155.20 per share within the period, thus suggesting that expectation of buyback before year-end may be the rationale for the stable price of Dangote Cement shares.