Dangote Cement Plc (DANGCEM) released its 2022FY audited financials recently, reporting an EPS of NGN22.27 (2021FY: NGN21.24). The achieved EPS (3.1% higher than our estimates) was driven by the robust growth in its topline (+17.0% y/y) and a moderation in tax expense (-18.5% y/y) during the period. The board has proposed a final dividend per share of NGN20.00 (same as the corresponding period last year), implying a dividend yield of 7.5% based on the last closing price of NGN272.00 (27 February).
The group’s aggregate revenue grew by 17.0% y/y to NGN1.62 trillion in 2022FY, inspired by broad-based expansion across its Nigerian (+21.3% y/y) and Pan African (+4.4% y/y) operations. On Nigerian operations, the revenue growth in 2022FY was largely driven by the increase in its price per tonne (+26.6% y/y) as volumes (-4.1% y/y to 17.84MMT) declined during the review period. Management noted that the decline in Nigerian sales volumes was due to the high base of 2021FY, which was further impaired by higher inflation, rising interest rates and energy supply disruptions which impacted production levels in 2022FY. On Pan African operations, we highlight that the decline in volumes (-8.1% y/y to 10.01MMT) was occasioned by elevated commodity prices, extended plant maintenance in Senegal and Congo, and higher freight costs in Cameroon, Ghana and Sierra Leone. Overall, the group’s sales volume declined by 5.1% y/y to 28.77MMT in 2022FY.
Gross margin contracted by 100bps to 64.6% in 2022FY (2021FY: 65.7%), as the cost of sales ex-depreciation (+20.4% y/y) grew faster than aggregate revenue (+17.0% y/y) during the period. Unsurprisingly, the higher cost of sales was driven by the surge in the consumption of fuel & power (+35.5% y/y) and raw materials (+12.1% y/y), reflective of the challenging business environment.
The group’s operating expenses ex-depreciation increased by +49.4% y/y in 2022FY due to the higher fuel prices with haulage expenses (c. 83.0% of the total OPEX) increasing by 25.1% y/y in 2022FY. Consequently, the group’s EBIT (-590bps) and EBITDA (-570bps) margins declined to 36.2% and 43.6%, respectively, in 2022FY.
Further down, net finance cost increased by 103.9% y/y to NGN91.66 billion in 2022FY, following the surge in finance cost (+98.4% y/y to NGN130.37 billion) which outweighed the increase in finance income (+86.4% y/y to NGN38.72 billion). The finance cost growth mirrors the impact of higher FX losses (+515.2% y/y to NGN53.93 billion in 2022FY) and gross debt (+25.1% y/y to NGN706.73 billion).
Overall, PBT grew by 19.7% y/y in Q4-22 (2022FY: -2.7% y/y) to NGN159.08 billion. Owing to a lower tax charge (-59.5% y/y), PAT grew by 63.5% y/y in Q4-22 (2022FY: +4.9% y/y).
Experts at Cordros Capital say “Comment: We are impressed with DANGCEM’s resilience in ensuring profitability amid the challenges that constrained operations across its Nigerian and Pan African operations. For 2023FY, we believe higher cement prices will continue to sustain DANGCEM’s topline growth. However, we see a further slump in volumes, as the constraints hampering production levels still linger, and our expectations that electioneering activities will weigh on demand, particularly in H1-23. Our estimates are under review.
