Tuesday, January 22, 2019 1:13:58 PM- Nigerian Stock Exchange.



  DANGCEM FY 2017 - Initial View

      Improved Margins but growth momentum cools off

March 21 (Lagos) - Dangote Cement Plc ( DANGCEM ) reported full-year 2017 result showing a 43% YoY growth in EPS to N11.65 (2017E: N16.11) on the back of improved margins, which more than offset the impact of lower finance income and bill to the taxman, to drive earnings below estimates. 



For context, while operating profit tracked higher by 67% YoY to N304 billion, the duo of higher net-finance charge (+973% YoY to N16.8 billion) and higher taxes (124% YoY to N85.3 billion) moderated earnings growth. The company reported dividend of N10.50/share (pay-out ratio: 87%) which translates to 4% dividend yield based on current pricing.



Going by the breakdown, much of the margin expansion in Q4 stemmed from higher prices in the Nigerian business (+7% YoY to N43,411/tonne) which more than made up for weaker volumes (-4% YoY to 3.1MT). Away from Nigeria, volumes were however stronger (+7% YoY to 2.3MT) as volumes in Cameroun, Ethiopia and Senegal jointly contributed to robust volumes in the period. 



Consequent on the mentioned, and pass-through from still high per tonne price in Nigeria, group revenue printed higher 17% YoY at N202 billion – missing our estimate by only 4.5%.
Elsewhere, energy efficiency improved over the quarter with cost of sales decelerating by 80bps YoY to N91.4 billion. 



For evidence, management reported lower usage of LPFO in the period to 2% and 1% of energy usage in Obajana and Ibese respectively (2016:29% and 16%) as local coal and gas usage assumed greater prominence. Thus, gross profit was 37% higher YoY to N110 billion with related margin at 54.7%, below Q1 – Q3 2017 levels. 



Other highlights from the result came in form of a surge in operating expenses (53% YoY to N41.8 billion), which we allude to higher haulage cost and professional fees. The combination of higher opex and lower ‘other income’ (-65% YoY to N2.3 billion) moderated growth in operating profit (+18% YoY to N71 billion) with related margin coming in 43bps higher YoY at 35.2%.



DANGCEM trades at a P/E and EV/EBITDA of 22.8x and 12.2x. Last communicated FVE from analysts at ARM Securities Ltd in Victoria Island of N 282 translates to a NEUTRAL rating on the stock. Their model is under review.

reporting for easykobo.com on Wednesday, March 21 2018 from Lagos, Nigeria




Source - analysts at ARM SECURITIES LIMITED. THIS ARTICLE PUBLICATION IS COPYRIGHT OF ARM SECURITIES LIMITED AND NOT TO BE REPRODUCED OR REPRINTED IN ANY FORM WITHOUT THE EXPRESS PERMISSION OF ARM SECURITIES LIMITED.


 WWW.ARMSECURITIES.COM 




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