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Dangote Cement’s revenue rises by 21% despite challenging economic conditions

29 Jul 2016
Financial Nigeria

Summary

The company's after-tax profit, however, fell 15.1 per cent to N103.4 billion in the first half of 2016.

Aliko Dangote, President and Chief Executive, Dangote Group

Dangote Cement has released its 2016 half-year results, showing that revenue for the period ended June 30 rose 20.6 per cent year-on-year to N292.2 billion from N242.2 billion posted in a similar period of last year.

After-tax profit, however, fell 15.1 per cent to N103.4 billion in H1 2016 compared with N121.8 billion in H1 2015, according to a statement released at the Nigerian Stock Exchange on Thursday.

“We have achieved a commendable result, given the very challenging situation in our main market and general economic weakening across Africa,” said Onne van der Weijde, Dangote Cement’s CEO. “Following the price cut we introduced last September, sales of cement in Nigeria continued their strong momentum and reached record levels of nearly 8.8 million tonnes, most of which was driven by smaller-scale building.”

Given the recent shutdown of oil and gas pipelines in Nigeria due to militant attacks, Dangote Cement was forced to rely on more expensive alternative fuels to power its plants. This caused the company’s operating margins and net profit to fall in H1 2016.

Dangote Cement’s gross margin dropped to 52 per cent in H1 2016 from 65 per cent in H1'15 while operating margin fell to 34 per cent in H1 2016 from 51 per cent in the corresponding period of 2015, according to CardinalStone Partners, a Lagos-based investment advisory firm.

The company’s cost of sales rose 64 per cent to N139.2 billion in H1 2016 from N84.5 billion in H1 2015. Financial charges also rose 324.7 per cent to N26.9 billion in H1 2016 compared with N6.3 billion in the same period last year.

“Our investment in coal is enabling us to reduce our dependence on both oil and gas as fuel sources, thus protecting our production from disruption and improving margins,” Van der Weijde said. “The devaluation of the Naira will obviously have an impact on costs and our priority will be to protect margins.”

Dangote said it recorded strong performance in its operations across Africa despite challenging economic conditions. In its West and Central Africa region – which covers Cameroon, Congo, Ethiopia, Ghana, Senegal, and Sierra Leone – the company said revenues rose 192 per cent to N49.9 billion in H1 2016, compared with N17.1 billion in H1 2015.

As for its South and East Africa region, covering South Africa, Zambia, and Tanzania, the company said revenues rose 50.9 per cent to N26.1 billion in H1 2016 as against N17.3 billion in same period last year.

“Across Africa we have made excellent starts and are achieving significant market shares in all of the countries in which we operate,” Van der Weijde said. “We are taking a more measured approach to the roll-out of new capacity across Africa and remain committed to our ambitious plans to be a global force in cement production.”

As at 9.43 am on Friday, Dangote Cement’s stock remained flat at N180.06 per share on the Nigerian Stock Exchange.
 


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