Dangote Cement Doubles Sales To N817bn In Q1, But Elevated Cost Pressure Claims Gains

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Dangote Cement Plc combined marked increases in sales volume and average product prices to hit sales revenue of over N817 billion for the group in the first quarter – more than double the corresponding turnover figure of N406.7 billion in 2023.

Elevated cost pressure, however, claimed virtually all the net revenue gains of over N410 billion, leaving after-tax profit for the period only slightly improved at 2.9 per cent to N112.7 billion.

The company’s interim financial report for the first quarter ended March 2024 shows an upturn from a 19.8 per cent drop in group sales volume of cement last year to an increase of 12.3 per cent to 7.0 million tonnes in the first quarter.

The recovery in volume indicates a turning point for the company this year after production and sales volumes went down for the second year in 2023.

Arvind Pathak, chief executive officer of Dangote Cement, said the gain in operating momentum is driven by an uptick in economic activities, which spurred a strong rebound in the Nigerian operations, delivering a 26.1 per cent rise in sales volumes to 4.6 million tonnes in the quarter.

Similarly, the company’s pan-African operations were buoyed by increased sales in Zambia and Congo, achieving a 3.1 per cent increase in volumes to 2.7 million tonnes during the quarter, according to Pathak.

This was a reversal of last year’s pattern when much of the sales growth came from outside the Nigerian market—the pan-African segment grew by over 123 per cent to almost N926 billion.

The domestic market recorded a 7.7 per cent improvement in sales to below N1.3 billion last year, as the pan-African segment expanded its share of group sales from 25.6 per cent in 2022 to 41.9 per cent in 2023.

The company’s CEO also stated that the gains made during the quarter reflect a renewed emphasis on exports, which paid off with dispatching seven ships from Nigeria to Ghana and Cameroon. “As a result, our Nigerian exports surged by 87.2%, reflecting our commitment to expanding our presence in regional markets and capitalising on our export-to-import strategy”, Pathak said.

All-round cost increases produced the elevated cost pressure that consumed revenue and hindered profit improvement during the quarter.

Production cost jumped well ahead of sales revenue, over 143 per cent in the quarter, to close at N398 billion. The cost of producing the naira of products sold rose from 40 kobos to almost 50 kobos, claiming more than 57 per cent of the net increase in sales revenue.

Selling and distribution expenses also grew ahead of sales, at 111.4 per cent to over N145 billion, and administrative expenses jumped by about 144 per cent to N45.5 billion at the end of March.

Net foreign exchange losses of nearly N64 billion were incurred in the first quarter, more than six and a half times the corresponding exchange loss of less than N10 billion in 2023. This is in addition to the net foreign currency losses of N164 billion the company suffered at the end of 2023.

Finance expenses jumped by 162.7 per cent over the review period to almost N59 billion as interest-bearing debts continued to mount.

The company’s borrowings closed in the region of N1.3 trillion in the first quarter, rising from a little over N1 trillion at the end of 2023. The figure excludes lease liabilities of about N28 billion at the end of the first quarter.

Through the income-expenditure flow, every cost level claimed an increased proportion of revenue and squeezed margins, including income tax expense, which expanded by 44 per cent to N53.7 billion. This made the difference between a 13 per cent growth in pre-tax profit to N166.4 billion and a modest increase of 2.9 per cent in after-tax profit to N112.7 billion during the period.

The company earned N6.68 per share at the end of the first quarter, slightly improved from N6.44 per share in the same quarter last year. It ended last year’s trading with earnings per share of N26.47 and has declared a cash dividend of N30 per share for shareholders.