Dangote Cement (DANGCEM) Company’s Full Year 2020 audited financials reached stock exchange community after the market’s close Tuesday March 23. The reports disclosed that company’s revenue hit the N1 trillion marks, making the Company the third listed entity on the NSE to have achieved this feat aside from MTNN and AIRTELAFRI
Also the group delivered impressive earnings as PAT rose by 37.7% y/y to N276.07 billion in FY-20 while EPS grew by 36.9% y/y to N16.14. The board has proposed a final dividend of N16.0 per share which implies a dividend yield of 7.3% based on the last closing price of N220.00.
The others indicators revealed the group’s aggregate revenue grew by 16.0% year on year to N1.03 trillion in Full Year 2020, driven by revenue improvement from its Nigerian operations grew by 18.0% year on year and Pan African operations grew by 12.7% year on year.
The report also attributed the topline growth in Nigeria to volumes which grew by 12.9% year on year to 15.9MMT compared to the increase in price per tonne up by 4.5% year on year. On Pan African Operations, the translation impact arising from the Nigerian naira’s devaluation was the primary catalyst behind the topline expansion of 12.7% year on year, as sales volumes rose by 4.4% year on year to 9.9MMT.
The report have it that the group’s overall sales volume increased by 8.6% year on year to 25.7MMT in Full Year 2020. Nevertheless analyst at Cordros Research noted that Quarter4 2020 revenue grew slower by 28.7% year on year when compare with 34.2% in Quarter 3, 2020, reflecting the dissipating effect of the pent-up demand for cement that ensued following the relaxation of lockdown measures in Q2, 2020.
The report pointed out that “although the 18.5% year on year increase in the cost of sales (ex-depreciation) outpaced the expansion in revenue grew by16.0% year on year, group EBITDA grew by 20.5% year on year in Full Year 2020, on the back of the 2.6% year on year sub-inflationary growth in operating expenses (ex-depreciation) and a 44.0% year on year increase in the other income line. Similarly, the EBITDA margin rose by 1.7ppts to 46.1% in Full Year 2020. On a geographical basis, Nigeria EBITDA margin weakened by 0.7ppts to 58.5% due to the pass-through effect of the local currency’s devaluation on dollar-linked cost items. This is evidenced in the surge in energy cost grew by 38.9% year on year in Full Year 2020 compared to the increase in volumes grew by 18.0% year on year. On the other hand, Pan African Operations EBITDA strengthened by 5.5ppts to 22.4% in Full Year 2020, the highest on record and substantially above the four-year average of 15.6%. According to management, this was due to cash cost improvement in 7 of its 9 Pan-African operations.
“Further down, earnings received a boost from the moderation in net finance cost declined by 71.7% year on year in Full Year 2020. This was supported by the blend of the higher interest income grew by 73.2% year on year, a foreign exchange gain of N16.63 billion in Full Year 2020, which was absent in Full Year 2019, and the high base finance cost in Full Year 2019 due to foreign exchange losses of N13.48 billion. Adjusting for the impact of the Forex gain in Full Year 2020 and Forex loss in Full Year 2019, net finance cost would have declined by 15.8% year on year in FY-20.
“Net operating cash flow (NOCF) rose by 20.1% year on year to N511.88 billion in Full Year 2020, driven by efficient working capital management as inventories declined by 5.7% year on year while trade payables rose by 22.2% year on year. The growth in NOCF supported the increase in cash and cash equivalents grew by 25.8% year on year to N141.04 billion which proved instrumental in the double-digit expansion in finance income grew by 73.2% year on year despite the lower yield environment in 2020.
“Overall, PBT grew by 49.0% year on year in Full Year 2020 with related PBT margin improving by 8.0ppts to 36.0%, on the back of the moderation in net finance cost and gains from cost management. Following a higher tax charge which stood at N97.24 billion in Full Year 2020 compare with N49.96 billion in Full Year 2019, PAT grew slower by 37.7%.
Comment: Cordros Research analysts said that the company’s revenue hit the N1 trillion marks, making DANGCEM the third listed entity on the NSE to have achieved this feat aside from MTNN and AIRTELAFRI. Analysts are also impressed by the additional 3MTA added to the Obajana cement plant in August 2020 and the record EBITDA margin achieved in Pan African Operations. With the Tanzanian power plant’s commissioning in November 2020, we (Analysts) believe this will support Pan African EBITDA margins going forward.
“However, we remain concerned about Nigeria’s cost pressures due to a weaker currency. From a market standpoint, we believe investors will react positively to the company’s solid earnings.”