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Dangote Cement retains BUY status despite weak revenue

Based on the recently released FY 2019 results published by Dangote Cement, revenue declined albeit marginally by 1.1% y/y to N891.7 billion.



Competition alert as Dangote Cement launches biggest sales promo in Nigeria, Dangote Cement: Feeling the heat of a slowing Nigerian market, Dangote Cement: Weak revenue performance, elevated OPEX weigh on earnings

Based on the recently released FY 2019 results published by Dangote Cement, revenue declined albeit marginally by 1.1% y/y to N891.7 billion. The weak topline performance coupled with an increase in Operating Expenses (+17% y/y to N184.6 billion) and Finance Cost (+16% y/y to N57.7 billion) led to a decline in Pre-tax Profit (down 16.7% y/y to N250.5 billion) in FY 2019.

The reported Revenue for FY 2019 (N891.7 billion) missed our estimate by 3% (CSL FY 2019 forecast; N922.3 billion).

Similarly, the Pre-tax Profit of N250.5 billion underperformed our FY 2019e of N276.9 billion. Although, Revenue performance was unimpressive in Q4 (down 0.1% q/q), the strong growth of 23.6% in Pre-tax Profit during the quarter was driven by lower cost of sales (down 8.5% q/q) as well as a reduction in Net Finance Cost (down 13.5% q/q).

Dangote Cement reveals share buyback plans

Dangote cement factory

The decline in Group Revenue (down 1.1% y/y) was due to weak Revenue from its Nigerian operations (-1.3% y/y to N610.2bn) amidst the subdued performance from Pan African operations (down 0.2% y/y to N282.7bn).

We, however, note that the sales promotional activities embarked by the firm (which kicked off in Q2 2019) continued to provide support for volume growth, as Revenue from Nigerian operations grew albeit marginally in Q4 (up 2% q/q).

Notwithstanding, we think the uninspiring performance in the Nigerian Operations during 2019 reflects the weak growth in the Cement sub-sector, which grew slower by 3.1% in 2019 compared to 4.5% in 2018 based on the latest GDP numbers released by National Bureau of Statistics.

On the other hand, Revenue from its Pan African operations fell in Q4 (down 5% q/q). Overall, Group sales volumes was flat y/y, coming in at 23.5 million tonnes in FY 2019.

Deal book 300 x 250

READ ALSO: MTN shares take severe pounding as Nigerian woes worsen

Despite the moderation in Cost of Sales (adjusted for depreciation), which declined by 1.3% y/y in FY 2019, EBITDA was pressured as it declined 9.1% y/y to N395.4 billion owing largely to the rise in Selling and Distribution Expenses (+22.8% y/y to N136.8 billion).

Accordingly, EBITDA margin declined 3.9ppts to 44.3% in FY 2019 (vs 48.3% in FY 2018). The increase in Selling & Distribution expenses (adjusted for depreciation) was driven by the increase in Haulage costs (+22% y/y to N107.2 billion) as well as Advertisement and promotion cost (+115% y/y to N8.6 billion).

Based on our last communication, the management noted that the increase in both cost items was due to their efforts in strengthening consumer loyalty and improving route to market.

Meanwhile, management kept a lid on Administrative Expenses, as it grew marginally (+2.9% y/y). The increase in OPEX (up 17% y/y) further drove the rise in OPEX/sales ratio to 0.21x in 2019 from 0.18x in 2018, indicating more was spent in generating N1 of Revenue.

Net Finance Cost also grew 30.2% y/y t0 N50.1 billion in FY 2019, owing to the increase in Finance Cost (up 16% y/y to N57.7 billion) amidst the decline in Finance Income (down 33% y/y to N7.6 billion). We highlight that the rise in Finance Cost was due to a Foreign exchange loss of N13.5 billion arising from its Pan African Operations.


[READ MORE: Dangote Cement signs pact with GE to digitise plants]

Pre-tax Profit declined by 16.7% y/y to N250.5 billion in FY 2019. Profit after tax, however, declined sharply, down 48.5% y/y to N201.2 billion in FY 2019 vs N390.9bn in FY 2018- the steep decline was due to a tax charge of N49.9 billion in FY 2019 compared to the tax credit of N89.5 billion in FY 2019.  Consequently, Earnings per share settled at N11.79/s in FY 2019 compared to N22.83/s in FY 2018.

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The firm declared a final dividend of N16.0/s, translating to a dividend yield of 9.4% based on today’s closing price of N170.0/s.

We have a BUY recommendation on Dangote Cement with target price of N224.4.

Dangote Cement: Weak revenue performance, elevated OPEX weigh on earnings

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Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,


PO Box 9117,

Lagos State,


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Currency deregulation and finding the true value of the Naira

Why does a government borrowing heavily choose to subsidize the dollar?



A colleague said to me, “it’s uncanny how your Central Bank’s policy on Foreign Exchange is similar to that of Zimbabwe of 2008”.

I had to go check what Zimbabwe did and where it led them to.  Zimbabwe. after a bout of hyperinflation, abandoned its currency. Nigeria’s current arrangement may get us there.

It is a good time to own a BDC. BDC licenses can cost as much as N15m now. The same license cost about N3m some years ago. Why has it gone up? A BDC can generate a weekly return of N1.3-1.4m just on a $50k bid.  Most people can live on that. With a spread of N65 on a dollar: official at 410 and parallel at 475, why do you have to sweat?

So what is the impact of this? A long run destruction of the economy, a higher subsidy than calculated on petrol and a significant market distortion. A distortion that profits less than 1% of the population and sending a higher number into poverty.

READ: FG rejects IMF’s advice to devalue the naira

With, until recently, accretion to reserves impaired by low crude prices and low volumes, there is a rapid depletion of the country’s reserves. Why does a government borrowing heavily choose to subsidize the dollar?

The answer is corruption. Corruption played out supported by perceptions of what could happen to the middle class if the Naira were allowed to float. Nigerians tend to politicize the exchange rates. It’s for them a sign of economic management. Governments in power have that awareness. It’s part of the play in sustaining corruption.

The future is bleak. The external reserves shed over a $1billion in the last few weeks. Nigeria is consuming the present and the future. There is really nothing to show for the years of interventions. With the ongoing challenges in security and rising poverty, the destination is going to be a crash.

It is time for market unification. It is time for Nigeria to move to find the true value of the Naira. It must stop the corruption in the markets.


Written by Demola Adigun

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Tinted windows: A quest for privacy and our collective need to be safe

There is an urgent need to balance out the need for privacy/comfort for vehicle owners and the overall security of the society.



It is 6:30 pm on a cold harmattan smothered evening on Oregun Road in Lagos, and Sola was driving his friend’s car as they headed for an evening hangout. Fred, the owner of the car is sitting in the front seat as Sola attempts to make a U-turn just before the exit into Opebi Link Road when a commercial motorcyclist (Okada) comes speeding on the driver’s side.

In the ensuing crash, the Okada rider was sent flying into the air and his bike slid into the middle of the road. As is normal in Lagos, a large crowd had gathered taking pictures and generally being a nuisance and when they saw the occupants of the car were all young men, the assumption being that they were drunk and that was the cause of the accident.

A Police patrol team on routine patrol arrived at the scene to forestall the breakdown of law and order and immediately moved the crowd away after pictures of the accident scene had been taken. The experienced Inspector who led the team noticed the windows of the car were dark and heavily tinted- with small holes cut into it to allow a limited view of the side mirrors. This limited the angle of view of the driver as he made the turn and thus the accident.

A very high percentage of accidents at turnings/ intersections in Nigeria are caused by poor visibility on the part of drivers in heavily tinted vehicles. The use of 5% tint (which is the darkest form of tint) is most prevalent in quasi security vehicles such as the Toyota Hilux in convoys and in vehicles owned by personnel of government security agencies.

Tinted windows are a fad amongst Nigerians and a status symbol especially for politicians and the wealthy. Tinted windows are basically two kinds: the factory tinted and the fit for purpose tints installed by the owner of the vehicle. Factory tinted windows have the tint coloured into the windows themselves and so it is not removable; while for the fit for purpose tint involves the use of a layer of film over the glass and it can be removed.

Some of the reasons for a window tint in a vehicle include a level of privacy for the occupants, protection from UV rays / the glare of the sun and to provide a look that is pleasing to the eye. Tints were initially only included in Sport Utility Vehicles (SUVs) because they do not come with a covered-up luggage area (Boot) and so the tint provided some sort of cover for the items in the Boot from prying eyes.

Factory tinted windows have a pigment inside of the glass themselves; while the purpose fit tints require the installation of a nylon film over the window that creates a tint in varying degrees. The degrees range from 50% which is the same as a factory tint, 35% which is a light and acceptable tint, 25% tint which is dark and acceptable in most instances and the 5% tint which is very dark and not acceptable in most instances.

Factory tint can be found on the rear windows of most new and fairly used SUVs and trucks. Tints are measured by the Visible Light Transmission Percentage (VLT%) in terms of the amount of light (UV rays that they allow into the Vehicle) and the 5% is the extreme of the spectrum with very little light coming through and thus it is very dark inside the vehicle especially at night, while the 50% is the very start of the spectrum with plenty light into the vehicle, thus it is bright).

In Nigeria, the Police determines and regulates the use of tints in vehicles and what is acceptable in the entire Federation. The Laws of the Federal Republic Nigeria places the onus and burden for the regulation of the use of tint in vehicles on the Nigeria Police both as a regulator and enforcer of the rules and procedures.

In the beginning, the Police only licensed vehicles with factory tinted windows, but in recent times the permit has been issued for non-factory tinted windows. According to the regulations, exemptions are issued for owners with a medical requirement for these types of tint for their vehicles and owners are required to provide evidence from government-owned hospitals for the permit to be issued.

Some of the reasons why window darkness is regulated include safety issue for vehicle occupant and other road users (i.e., you cannot see clearly enough especially at night and thus become a danger to yourself and other road users). Secondly, law enforcement officers need to be able to see the occupants of a vehicle at any point in time (this might be for purposes of a routine search or just so that occupants are visible in the event of harm being done to anyone inside the vehicle).

In absence of a clear scope from the Nigeria Police on the acceptable levels of tint, what we have in play in Nigeria is individuals opting for varying levels of tints based on their own desires, needs and their location. The existing laws have been widely ignored and this has led to the proliferation of some of the harshest degrees of tints in vehicles in Nigeria and profiteering by unscrupulous groups and individuals in the market for vehicle tints. Road users have been known to be subject of inducements from law enforcement officers especially on the highways between states in the federation.

There is an urgent need to balance out the need for privacy/comfort for vehicle owners and the overall security of the society. The Nigeria Police has on several occasions raised the alarm about the use of dark tinted vehicles by kidnappers and armed robbers. This led to the issuance of the Tint Permit which required a physical inspection of the vehicle and capturing of the biometrics of the owner.

The non-enforcement of the original policy and its dilution with all manner of exemptions have totally eroded the initial gains of the policy. On the Portal for the tint permit hosted on the website of the Nigerian Police, there is a clear notice to vehicle owners informing them that the permit is only issued for factory tinted vehicles and there is a need to enforce this provision if we are going to eliminate the dangerous levels of tints we presently have on our roads.


While it is understandable that some individuals want to guard their privacy, public safety comes first.

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