Dangote Cement on Tuesday published its Q1-18 result at the floor of the Nigerian Stock Exchange (NSE).

From every indication, the result demonstrated strong growth in both revenue and net profit as both grew by 16.3% y/y and 23.9% q/q respectively.

Q1-17 tax charge and consequently, net profit, were restated for easy comparison. On the unadjusted numbers, the latest net profit is lower by only 1.2%.

A closer look on the results revealed that revenue was boosted by higher Non-Nigerian price; Compared to Q1-17, group volume grew by only 3% while price was higher by 13%.

However, non-Nigerian volume was flat; while average price was higher by 8% y/y. however, the management had said it would raise prices outside Nigeria, specifically in Ethiopia, to offset the impact of last year’s devaluation. A marginal 5% volume increase was also achieved in Nigeria (recall that LAFARGE’s Nigerian volume contracted by 5% y/y in Q1-18), with y/y price differential now 8% (vs. 55% average in Q1-Q4 2017), as low base-effect almost completely wanes. The achieved group revenue beat our estimate by 10%.

On Higher margin, gross margin grew by 197 bps y/y and 506 bps q/q to 59.8% at group level, but behind our 62% estimate. EBIT margin also increased by 288 bps y/y and 769 bps q/q. Non-Nigerian gross margin increased significantly, both on y/y and q/q bases, reflecting mainly the impact of the price increase (although per unit production cost was lower q/q).

In Nigeria, gross margin was higher by 113 bps y/y (on favourable pricing), but declined by a marginal 14 bps q/q. Per tonne cost in Nigeria was the same as in Q4-17, but lower by 2% y/y.

Besides, opex-to-revenue ratio declined by 104 bps y/y and 359 bps q/q to 17%. The ratio was much lower in Nigeria (14%) but higher abroad (25%), wherein start-up costs are still substantial. Overall, group opex grew by 9.6%.

On the overall, net finance income stood at NGN4.6 billion, vs. -NGN5.9 billon in Q1-17 and -NGN3.8 billion in Q4-17. The net finance income is the group’s first since Q2-16, supported by a net exchange gain of NGN12.5 billion, driven mainly by higher naira exchange rate and the resultant in gains on intergroup assets.

Also, the group effective tax rate came in at 33.5%, higher than the recomputed 28% for Q1-17, but lower than the 84% rate recorded in Q4-17. Tax was again provided for the new lines awaiting pioneer approval in Nigeria, resulting in effective tax rate of 30%, although below the one-time Q4-17 rate of 84% (comprising provisions for Q1-Q3 also).

Industry analysts saw the result as being very impressive and more of a good start for the 2018 business and financial year after all.