Dangote Group


Dangote Cement Plc has told analysts representing various investors’ interest that the company’s balance sheet, and cash flow position remained strong despite the development in the global economy. However, the Group said its foreign exchange exposure is limited, at 24% of the Group total debt book.

Meanwhile, the management stated that the portion of the total debt exposed to the dollar is mainly outside Nigeria. The management explained that the Group also has over ₦300 billion headroom with existing commercial papers and bond programmes to firm growth and refinance short-term debt.

Amidst analysts’ consensus estimates of declining demand in the cement market, the management said the Group stands tall despite rampaging COVID-19 on its Pan-African market. In its recent first quarter (Q1) earnings discussion with analysts, the management restated assurance of its full commitment to proactively monitoring key dimensions as regards its operation.

The focus, according to the management, remains mitigating the negative financial impact of coronavirus pandemic on its financials.

Speaking with analysts, Michel Puchercos, the Group Chief Executive Officer at Dangote Cement Plc said the Group revenue jerked up 3.8% to ₦249 billion. He stressed that the growth was supported by higher volumes and pricing in Nigeria.

Puchercos explained that the Group EBITDA jerked up 2.2% to ₦114 billion, at a margin of 45.8%, owing to strong performance in Pan-Africa.

“On the operational side, Group volumes were relatively flat at 6.3 million tonnes, despite the initial impact of COVID-19”, he added. “We had a slight increase of 0.7% in our Nigerian volumes as domestic growth at 5% compensated for the absence of exports.

The Group CEO said in Pan-Africa terms, sales were slightly affected by lockdown in South Africa at the end of March, and therefore, was down 2.9% on Q1 2019. Meanwhile, profit before tax was up 11.5% while earnings per share were up by 1.7% to ₦ 3.6.

Puchercos said: “We recorded a higher effective tax rate in Nigeria. Pioneer tax exemption for all remaining lines ended in the quarter, resulting in an increased Nigeria effective tax rate for 2020.

“In addition, there was ₦42 billion in unrealized foreign exchange gains due to intercompany balances between the Cement Company and foreign subsidiary, resulted in finance income in our Nigerian operation”.

He added that this unrealized foreign exchange gain was driven by the decrease in value of the naira against U.S. dollars.

“When consolidating the accounts, most of the impact of these unrealized gains will be cancelled. The average interest rate is decreasing compared to 2019. The profit for the period and earnings per share are growing slightly compared to 2020”, the GCEO stated.

The Cement Company’s boss said Pan-African operations have achieved the highest ever quarterly earnings before interest, tax, depreciation and amortisation (EBITDA) contribution at ₦14.6 billion.

“While we still have a few underperforming units, the overall Pan-African performance is showing continuous improvement despite a challenging environment”, he said.

The Group net debt was under ₦191 billion as of March 31, as the management emphasises that the Group balance sheet remains strong. The Chief executive officer explained that in April, Dangote Cement completed the issuance of ₦100 billion series five years bond under our ₦300 billion Bond Programme.

He said the Transaction was 1.5x oversubscribed and represents a debit bond issuance in the debt capital market. Puchercos considered the capital raise as the largest corporate bond issuance in Nigeria’s debt capital market.

“We have started expanding our debt maturity profile and reducing short-term liability”, he added.

In addition to strong operating cash flow, the Group also has over ₦300 billion headroom with existing commercial papers and bond programs to firm growth and refinance short-term debt. Also, Dangote Cement said it has limited foreign currency debt exposure with just 24% of total debt exposed to the dollar and mainly outside Nigeria.

Market performance in Q1 2020

Speaking further, Puchercos said: “We sold over 4 million tonnes in Nigeria, which was about 0.7% higher than sales in Q1 2019. Excluding Q1 2019 exports, volumes were up 5% year-on-year in the domestic market. We had a record-high revenue of ₦179 billion, up 5.6% compared from Q1 2019. EBITDA remained strong at ₦103 billion, with a margin of 57.6%, notably owing to lower discounting and rebates”.

However, the Group stated that its logistics and energy costs increased in Q1.

“While these increases are considered temporary as part of the COVID-19 measures, we have been deploying various initiatives to optimize Dangote Cement very competitive cost base in Nigeria and across our Pan-African operation”, the Puchercos said.

Meanwhile, the management said Pan-African revenues of ₦69.8 billion were relatively flat in the first quarter. Sales volume was slightly down due to lockdown in South Africa in the last week of March as a measure to curb the spread of COVID-19.

Explaining the development, Puchercos said: “We achieved a record high EBITDA of ₦14.6 billion at 23.4%, supported by strong performance in Ethiopia and Senegal.

“Also, a record high EBITDA margin of 21%, thanks to cash cost reduction efforts, price improvement in some countries and volume increase in some markets”.

Again, Dangote Cement stated that it saw volume growth in Cameroon, Congo and Ethiopia. The management stated that it maintained good market share in Ghana, Senegal and Sierra Leone, as volumes were up as well.

However, the company’s Chief recognised that South Africa economy remains subdued and the cement market depressed owing to negative growth in the economy. Our sales there were down 1% from Q1 2019, he said.

“We notably churned a lot of space in the last week of March, owing to the total lockdown the country. In Tanzania, our sales were down 13% compared to Q1 ’19 as a result of daily production challenges in the quarter. Also, high levels of rainfall made raw materials more challenging. Zambia economy is currently in recession.

“As a result, Dangote Cement Zambia’s volume was down 39% compared to Q1 ’19. However, there were price increases in the quarter, which offset partially the lower volume”, Puchercos explained.

Our outlook for 2020

Amid COVID-19, the company pledged to reassure investors that they are proactively monitoring key dimensions of the operations to mitigate the negative financial impact. He said the firm is closely controlling its capital expenses, working capital needs and fixed costs to maintain strong and resilient cash position.

“To maintain an optimal capital structure, we constantly consider appropriate options, further accessing the debt capital market in Nigeria”, he said.

Given full lockdown in South Africa, Ghana, Congo and some parts of Nigeria from the end of March, April volumes were trending lower than the volumes and values during the same period last year. Meanwhile, Puchercos hinted that the group share buyback plan has been approved by the Securities Exchange Commission (SEC).

“We also begin exporting clinker to West and Central Africa from Nigeria this year. The Obajana Line 5 was filed. This will make Dangote Cement Plc capacity at Obajana 16.3 million tonnes”, Puchercos said.