Commentary
- This morning, Dangote Cement Plc (DANGCEM) released its audited FY 16 results with EPS of N11.34 — 6% ahead of our call. In addition, DANGCEM announced a dividend per share of N8.50 (dividend yield: 5.0%)
- Non-Nigerian sales momentum continues into Q4 16: Looking at the results, revenue growth in the last quarter was strong (+37% YoY) mainly driven by robust non-Nigerian sales (+79% YoY) which accounted for 31% of group revenues as at full year (vs. 21% in prior year). On the Nigerian leg, revenues also rose 26% YoY to N118 billion in Q4 16 despite a 28% cutback in volumes following strong price increase in August 2016.
- Energy pressures persisted into the last quarter: In line with the trend over much of 2016, cost pressures remained evident in the quarter, with management attributing the spiraling cost to energy inflation across Nigeria following extended gas shortage and aggressive fallback to expensive alternatives in the review period. Commentaries provided suggest that sub-optimal fuel mix saw cost of power consumed increase by 69% YoY to N112 billion (or ~35% of total manufacturing cost) over FY 16.
- Deferred taxes from non-Nigerian operation bolsters earnings: In addition, following deferred tax credit of N5.7 billion (largely reflecting huge tax credit of N21 billion in Q4 16 which offset tax charge of N15 billion over 9M 16), DANGCEM reported an after tax profit of N186.6 billion—beating our FY 16E and last year’s performance by 6% and 3% respectively.
- Dangcem trades at 2017E EV/EBITDA of 8.6x vs 10x for EMEA peers with our FVE at N195.26. We have an OVERWEIGHT rating on the stock.
