Dangote Cement Plc (DANGCEM) released its Q2-23 unaudited financials on Friday (28 July), reporting a modest standalone EPS growth of 0.7% y/y to NGN3.95 (Q2-22: NGN3.92), bringing the H1-23 EPS to NGN10.39 (H1-22: NGN10.10). The EPS growth was inhibited by the surge in net finance cost (+377.6% y/y).
DANGCEM’s aggregate revenue grew by 37.8% y/y in Q2-23 (H1-23: +17.7% y/y), inspired by a broad-based expansion across its Nigerian (+32.9% y/y) and Pan African (+95.1% y/y) operations. During the review period, Nigerian operations revenue growth in Q2-23 was largely driven by the increase in its price per tonne (+34.1% y/y) and volumes (+25.0% y/y to 4.5MMT). Management noted that the increase in Nigerian sales volumes was due to the uptick in economic activities in the quarter. On Pan African operations, we highlight a volume decline (-21.1% y/y to 3.36MMT) in Q2-23, but cumulative volume for H1-23 (+11.6% y/y to 5.4MMT) increased as the region saw robust demand in Q1-23 (+84.5% y/y to 2.8MMT), especially from Ethiopia, Senegal, Zambia and Congo. Overall, the group’s sales volume advanced by 2.8% y/y to 7.15MMT in Q2-23 (H1-23: -5.5% y/y to 13.42MMT).
Gross margin expanded by 22bps y/y to 64.7% (vs Q2-22: 62.5% y/y), attributable to management’s efficient cost management and robust revenue growth strategies. We note that the increase in the cost of sales stemmed from the rise in raw materials (+17.7% y/y) and energy (+34.7% y/y) costs in the period.
The group’s EBITDA advanced by 58.8% y/y, underpinned by an increase in government grants (NGN4.93 billion vs Q2-22: 8.00 million) and sundry income (NGN4.29 billion vs Q2-22: 160.00 million), outweighing the higher OPEX ex-depreciation (+22.5% y/y). Accordingly, EBITDA (+62bps y/y) and EBIT (+67bps y/y) margins increased to 47.3% and 41.0%.
Net finance costs surged by 377.6% y/y to NGN223.17 billion, primarily driven by a 66.5% y/y increase in finance costs amid a 50.7% y/y decline in finance income. This increase was due to the group recording a considerable net exchange loss on foreign-denominated transactions (+362.8% y/y to NGN103.84 billion) from third-party loans and payables in the Nigerian entities, exacerbated by the devaluation of the naira in mid-2023.
Following the preceding, PBT declined by 14.2% y/y in Q2-23 to 93.04 billion (vs Q2-22: NGN108.49 billion). Nonetheless, a lower income tax expense (-43.3% y/y) caused the PAT to grow by 4.3% y/y to NGN69.10 billion (vs Q2-22: NGN66.25 billion).
