DANGCEM delivered another a stellar performance despite pressure on margins

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The Dangote Cement Company (DANGCEM) announced audited financials showed the company delivered another stellar performance following the solid earnings reported in first quarter 2021. The report in the second quarter 2021 showed PAT standalone rose by 55.5% year on year to N101.92 billion while EPS grew by 53.9% year on year to N5.92, bringing half year 2021’s EPS to N11.18 with positive grow of 50.2% year on year. On an annualized basis, the company’s half year 2021’s EPS stood at 37.7% ahead of the 2020 Full Year while EPS of N16.24 and 29.6% above our 2021Earnings with EPS forecast of N17.26. The growth in EPS was driven mainly by an impressive topline growth and higher FX gains, both of which neutered the impact of elevated cost pressures and the surge in tax charge.


The group’s aggregate revenue grew by 57.2% year on year to N357.89 billion in second quarter 2021 while half year 2021 stood at 44.8% positive year on year to N690.54 billion, driven by broad-based expansion across its Nigerian to grow of 66.3% year on year and while Pan African anchored on 40.4% grow year on year operations. For the Nigerian operations, revenue growth was driven mainly by volumes increased of 46.3% year on year to 4.96MMT compared to the price per tonne increased by 13.7% year on year. We believe the robust sales volume growth in Nigeria was supported by demand from the public sector given the renewed focus of state governments to accelerate activities on construction sites and the low base effect from the prior year.


Amehnews recall that lockdown rules severely impacted the construction sector in second quarter 2020. On Pan-African operations, the translation impact arising from the Nigerian naira’s devaluation combined with the expansion in sales volumes increased by 15.3% year on year to 2.80MMT drove the increase in the topline. Overall, the group’s sales volume increased by 33.4% year on year to 7.76MMT in second quarter 2021 to half year in 2021 which stood at 26.1% grow year on year to 15.28MMT.


The result showed Group’s EBITDA grew strongly by 66.7% year on year to N173.09 billion in second quarter 2021, as the topline growth by 57.2% year on year and an increase in other income by 32.2% year on year which trumped the increases in the cost of sales ex-depreciation by 59.5% on year on year and operating expenses ex-depreciation up by 28.9% on year on year.



Similarly, the EBITDA margin rose by 2.8ppts to 48.4% in second quarter 2021 but weakened significantly on a quarter by quarter basis – down 510bps from 53.5% in first quarter 2021. When compare with Lafarge, analysts believe the weaker EBITDA margin on a quarter by quarter basis was due to the alignment of the official rate to the I & E window rate, which amplified pressures on energy cost – gas contracts are denominated in USD but settled in naira based on the official exchange rate.


“Net finance cost stood at a positive of N700.00 million in second quarter in 2021 relative to a negative of N6.91 billion in second quarter 2020, following the more than double-fold increase in finance income anchored on N11.43 billion in second quarter in 2021 as against N4.94 billion in second quarter in 2020. The strong growth in finance income was driven mainly by the jump in FX gains positive grow of 353.7% year on year to N5.67 billion amidst higher interest income of 56.1% year on year.


Overall, PBT grew by 102.1% year on year to N151.15 billion in second quarter of 2021, with related PBT margin improving by 9.4ppts to 42.2%. The surge in tax charge stood at N49.23 billion in second quarter of 2021 as against N9.24 billion in second quarter of 2020 led to a slower growth in PAT by 55.5% year on year to N101.92 billion in second quarter of 2021.


According to analysts at Cordros Research saying Given the high inflationary and exchange rate pressures in the economy, analysts are impressed that the company delivered another remarkable performance. Analysts reiterated says We also like that the company has completed its 3MTA Okpella plant in Edo State waiting to be commissioned in third quarter of 2021.

“We believe economies of scale associated with the additional capacity will help in shielding EBITDA margins in Nigerian operations from cost pressures emanating from the recent alignment of the official rate to the I & E window rate. We expect upward consensus review to forecasts given the impressive run rate as at half year of 2021, it was added

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