Aliko Dangote
Aliko Dangote

Arguably, Africa’s largest cement producer, the Nigeria-originating Dangote Cement Company is almost cresting the trillion-naira revenue mark. Indeed, things went on so well for it in the outgoing year as it also got an unexpected positive tax boost to wit. And this good fortune is making more and more millionaires of investment-savvy Nigerians as JULIUS ALAGBE explains.

Dangote Cement was in the news last week with stunning news of not only completing the financial year 2018 in the green corner but also of having secured additional tax reliefs that ultimately translate into, more money for the company, and by extension, shareholders! And it did, with the company announcing a full dividend pay-out of N16.00 for every unit of the Dangote Cement stock held by shareholders. And so, for shareholders of the company, it is definitely a time to clink glasses.
Even for those who have only become recent holders of the Dangote Cement stock, they would also not be left out of the celebrations. And this is on account of the relatively encouraging good fortune that the stock has continued to attract. For example, as at the close of trading last Friday, Dangote Cement’s market value per share which averaged N186 in 2018 was now resting at N195.
What this means then is that for an investor who threw in some N10million naira into the stock just before the close of the trading year in December, he would be receiving about N25 on every stock held at this time!
If the recent entrants into the Dangote Cement honeypot are getting this much, it would indeed be particularly more awesome for shareholders who had been with the company since it was listed on the Nigerian Stock Exchange, NSE on March 8, 2007 and who had been serial recipients of annual dividend payments and capital appreciation perks that has been their lot over the years.
For example, in July 2012, the stock was trading at N111. Exactly one year later, it had soared to N141. And by March 2014, the stock had risen to N240.
In 2010, Dangote Cement declared and paid N4.25 per unit of share held by subscribers. This was split into N2.00 for the third quarter and N2.25 for the fourth quarter. A year after, DangCem paid N1.25 in addition to N1.10 bonus shares for every unit held by its subscribers. This string of consecutive payments continued with its paying N3 for every share held by its investors in 2013.
Raising the bar, the annual dividend sum was doubled in 2014 as DangCem declared and paid N6 per share. The company’s dividend payment surged further in 2015 with investors taking N8 on each share held.
Indeed, taking our baseline from say the 11th of March, 2010, when Dangote Cement opened for trading that day at N128.25, any investor that picked up the stock that day and had held on to it since then would have appreciated by 52%, 8 years after. In cash terms therefore, our illustrative N10million investor would now have gained some N5.2million on his holdings with the company.
Should he however have been a lot more investment-savvy and fully explored the pull and push tides that accompany regular trading on capital markets as the NSE, then he could equally have secured some even greater volume of gain on his primary investment sum.
This is because stock appreciation depends on when an investor enters and/or exits the market. Thus, another investor that had taken a position when the same Dangote Cement stock was trading at N96 would have ordinarily speaking, gained more than 103% by now.
Understanding the 2018 good fortune
It feels good to have more money in the kitty doesn’t it? Well, that is how it seemingly is at Dangote Cement Plc at the moment where real profits have spiked on account of among others, savings made from a greater focus on ensuring operational adjustments and what analysts would call unanticipated but stridently negotiated tax concessions.
Specifically, the firm was able to achieve critical energy cost savings even as it equally secured a Group tax credit from the authorization of the pioneer tax status on the Ibese Production lines 3&4 as well as Obajana line 4.
Given the macro-economic headwinds that firms operating in Nigeria have had to grapple with in the past few years, Dangote Cement has clearly been hard at work, chipping away at the blocks, to ensure that it does not really spend any kobo that it has to retain.
This tightening has now seemingly begun to pay off and what is important today is that the numbers are presently looking good. As outlined in its 2018 Full Year results, the firm posted a 91% year on year spike in its bottom line, soaring up from N204.25 billion to a new high of ₦390.33 billion which it derived from improved revenues that ran on to N901.21 billion in the year under review.
Of this, the Nigerian operations accounted for N618.30 billion, which in itself is an increase of 11.9 per cent above the N552.36 billion it had grossed in-country in the previous year. There was also a positive swing in its earnings per share, EPS ratio which moved from N11.65 in FY 2017 to N22.83 in FY 2018.
Beating his chest over this impressive outcome, an upbeat Group Chief Executive Officer, Dangote Cement, Joseph Makoju, enthused: “This is a record financial performance by Dangote Cement, driven by a strong increase in our home market, Nigeria, despite heavy rains and uncertainties about the election.’
The details of the outcome throw more light on the matter.
In terms of its specific offerings in the market relative to its peers, Dangote Cement now accounts for as much as 65 per cent of the total volume sold in the Nigerian domestic cement sector in 2018.
On the continental turf, the company exported 800,000 metric tonnes (MT) of cement to West African countries, strengthening the nation’s position as a growing cement exporting country, along with the corollary gains of creating some much-needed jobs in the economy, and earning valuable foreign exchange for the nation.
Dangote sold a total of 23.54 MT of cement across Africa indicating an increase of 7.4 per cent over 21.92 MT sold in 2017. In the view of Chairman, Aliko Dangote, the plan is to even do better on this score in 2019.
Speaking in Lagos during the 2018 Distributors Award Night, The President, Dangote Industries Limited, Alhaji Aliko Dangote, said Dangote Cement’s exports to other African countries was already targeted to rise to $600m annually.
 “By next year, we will be the largest exporter of cement in sub-Saharan Africa with about $600m worth of cement export to other African countries with limited access to limestone.
“In addition, we also have new terminals coming up at Onne and in Lagos. We are hopeful the congestion at Apapa will soon be behind us, helping us to meet our export targets.”
“Let me reiterate that our continuous efforts to innovate, create value and invest in Nigeria are borne out of our firm belief in the vast economic potential of Nigeria.
“Our target is to ensure that Nigeria becomes self-sufficient in all the sectors where we play; cement, agriculture, mining and petroleum.”
Still on the 2018 performance, Nigerian operations accounted for 14.18 MT representing an increase of 11.4 per cent over the volume of 12.72 metric tonnes sold during the preceding year.
And where would the revenue and profit ‘windfall’ be going? Of course, part of it would be going as already stated to its shareholders who will be getting a N16.00 dividend pay-out for every share of the company’s stocks that they hold while a chunk would, almost without thinking be going into that critical area that helped it get part of its current result, namely, continuing to boost group operational efficiency.
This is notwithstanding the evidence from the field, and particularly from the Lagos area, which points to a paradox of unoccupied houses and office buildings even when the housing deficit is still in the two-digit range.  This should ordinarily bother a construction materials producer like Dangote Cement but the worry seems to be for another day.
No doubt this is a fallout of the downturn and recession in the company’s main market, Nigeria, which would have undoubtedly had a dampener effect on its overall operations, giving the connection between economic growth and construction where its products come in handy. But with the recession now formally over and the faint outlines of renascent growth now in the air the hope is that things would begin to turn soon for the overall economy and also make it less difficult for even well-heeled business operations like Dangote Cement to achieve their business objectives and post profits.
Further, the surge also belies the evidence from the GDP charts of the National Bureau of Statistics which show that the past three years for example has continued to witness an uninterrupted string of negative contractions in the real estate sector where Dangote Cement’s products are primarily deployed. In the latest breakdown for Q4 2018, the sector’s real growth figures stood at -3.85%, which is yet negative just like the -2.68% that had been recorded in Q3 2018 before it.
Analysts’ hopes are that with the conclusion of the 2019 elections, the focus can now return more decisively to tackling the crisis of sluggish growth in the overall economy such that clearly hardworking players like Dangote Cement can find a better berth to grow on.
In a pre-election report, the markets analysts, Proshare had called attention to seven imperative change movements that require addressing. They are: Oil & Gas Sector Reform, Power Sector Reform, Boosting Competitiveness in Trade and Investment, Transportation & Infrastructure Development, Human Capital Development, Security and Boosting Agriculture Productivity.
‘Overall, considering an aging agriculture and mostly rural labour force, high rural to urban migration and the predisposition of youths to modern services, commercial agriculture offers the best chance at restoring food security. The cost of inaction cannot be overstated as we herald the start of new administration. The risk factors remain on the horizon and remain poised to break the bonds of this tenuous seal. The country remains vulnerable to oil price shocks as buffers remain weak. While crude oil production levels are expected to increase, latent security risks in the Niger-delta region, amid volatile oil prices could pressure government finances. Crude oil receipts pressure would most definitely filter into FX liquidity risk, which would exert immense pressure on the economy. The issues are rife and seemingly insurmountable, if political expediency remains the first criteria for decision making,’ the report argued.
‘In our view, President Buhari’s victory presents him a new opportunity to choose between setting the country on the path to prosperity or sustaining poor policy choices with economic consequences of a bleaker growth prospects. Nigeria’s fiscal vulnerabilities as well as her economic structural faults continue to worsen poverty levels (estimated at 91.3m people according to Brookings Institution), unemployment and economic growth, which require the government to take very decisively tough decisions. But, given the socialist leaning of the current government, would Nigerians have to wait till 2023?’
Beyond Nigeria also, Dangote Cement, which maintains a fairly impressive track record of venturing into the pan-African business arena is also having to juggle its issues in those expanded markets.
There were issues in Ghana, Tanzania and Ethiopia within the firm’s pan-African operations and analysts worry if some of these would not be attributed to inadequate due diligence and whether they would not affect continental expansion growth plans overall.
These challenges notwithstanding, the African operations recorded revenues of N263.26 billion, representing an increase of 9.6 per cent over the N258.44 billion posted in the corresponding period in 2017.
Makoju also responded on the continental picture:
‘Although Pan-African volumes were unchanged in 2018, I am confident that we will see an increase in 2019, driven by higher volumes in Tanzania, Ethiopia, Congo and Sierra Leone. Now that we have gas turbines operating in Tanzania, we will also see increased profitability in the Pan-Africa region and this will help to improve overall Group margins.”
With the current state of affairs concerning Dangote Cement, it is looking like for anyone ‘who wants to be a millionaire’ in this season, your decision may have been made for you: do not delay, join in the fun today and savour the ongoing Dangote Cement dividend and capital appreciation binge! More so because, in the ways of the market, these things do not last forever!
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