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Dangote Cement hits N442b in Q3 as profit weakens on forex hiccups

Key driver of backward integration in cement supply chain, Dangote Cement Plc has declared increased revenue of N442.09 billion in the last nine months, the company’s financial report released yesterday at the Nigerian Stock Exchange indicated.

The revenue in the nine month ended September 30, 2016 was 20.97 per cent higher than the figure recorded during the same period in 2015, despite the harsh operating environment, a development attributed to management’s strategy to leverage on its pan-African status.

The report indicated that Dangote Cement increased the revenue by N76.642 billion from N365.450 billion it made during the same period in 2015.

Indeed, the foreign exchange crisis gulped a huge amount of its revenue, as it spent N231.684 billion on cost of sales during the review period of nine months 2016 as against N138.694 billion spent on the same purpose in nine months 2015.

The money spent on cost of sales affected the profit after tax of Dangote Cement from N157.993 billion it made in the comparable period of 2015 to end the current period with N133.521 billion.

Reflecting on its outlook, the Managing Director of the company, Onne Van der Weijde said the management is confident of delivering strong growth this year despite the challenging economic conditions facing Nigeria and the rest of Africa.

Dangote Cement achieved particularly strong sales growth in Nigeria, however expect the final quarter to be lower because of the high Q4 base in 2015 and also because of the price increase that became effective on 1st September 2016.

He said, “This price increase will have an immediate and positive impact on margins in Q4, as will the elimination of LPFO from our fuel mix, as we increase our use of coal and as higher gas levels return. We do not expect to use LPFO again this year. From January 2017, our use of own-mined coal, sourced in Nigeria and paid for in Naira, will further improve margins and significantly reduce our need for foreign currency.

“As we have previously made clear, our focus will be to improve margins through cost controls and the adjustment of prices. We have new capacity coming onstream in Congo and Sierra Leone and expect Tanzania to increase its market share in the coming months.

“Foreign exchange constraints in Nigeria have made us reconsider the pace of our expansion and we now believe that a longer-term building programme will enable a more measured approach that balances our ambition for growth with the realities of obtaining foreign currency in this difficult environment.”

The Cement firm’s results showed that profit before tax fell by 38 per cent year on year to N23.8 billion while profit after tax grew markedly by 147 per cent year on year to N68.3 billion.