Key Highlights of Dangote Cement Plc Q3 2018 Conference Calls


Tuesday, October 23, 2018 / 09:44 AM / Cordros Capital Research


DANGCEM published 9M 2018 results yesterday. The group has grown EBITDA by 15% and PAT by 3% in nine months. Earnings growth by the end of 2018 will be much stronger, (1) adjusting for the one-off 84% effective tax charge in Q4 17 and (2) upon receipt of approval for waivers vis-à-vis the pioneer tax incentive in Nigeria.

Management sounded quite satisfied with the performance in today’s conference call, the key points of which we highlight below:

  • The group has received confirmation of pioneer tax application in Nigeria, and expects to receive the accompanying certificate by end of October 2018
  • Pioneer tax impact will likely be a reduction in effective tax from 28% as at 9M-18 to 15% by end-2018
  • Ghana operation now has a new management, and a number of cost containment programmes are in place to boost EBITDA going forward
  • All kilns in Nigeria are now running on Nigerian sourced gas and coal
  • Own-mined coal accounts for up to 90% of coal used by the group in Nigeria. The balance is obtained from 3rd party companies as a strategy to ensure security of fuel supply
  • The group is in the process of commissioning a 2.5Mts/yr plant in Niger Republic - 2020. The investment (external sources say will cost the group USD250 million) is strategic, (1) as it is planned to reduce the burden of exporting from Nigeria – management said most of the group’s export from Nigeria is currently to Niger, and (2) upon completion, will serve neighbouring Chad, Burkina Faso, and Mali.
  • Update on Tanzania – (1) plant will become gas-fired from early November, (2) connection to gas plant should reduce per tonne cost by USD25, and (3) 300k tonnes (from average 200k tonnes in Q2 and Q3) output is achievable once plant starts running sustainably on gas
  • Sales volume in Cameroon in Q3 (-17% y/y and q/q) was affected by a 4-week unplanned shutdown in production which has now been resolved
  • Group is adopting "regional pricing strategy" to protect market share in Nigeria, and is also flexible on pricing in some outside Nigeria markets (e.g. Zambia, Senegal, Congo q/q) in support of volume
  • Nigeria export sales are about 200k tonnes per quarter. This year we will do approx. 800k tonnes versus 700k tonnes last year
  • Heavy rain and flooding affected key markets in Nigeria in September. So far, October is -2% vs October 17. According to management, "but when we’ve had flooding before, we usually see a strong bounce a couple of months later"
  • The total cement market grew by 9.6% in 9M 2018 and 9.7% in Q3 2018
  • What you need to know about of the newly launched BlockMaster cement: (1) a premium product, (2) high quality (preferred by block makers), (3) high compressive strength (preferred by construction heavy-duty companies, and (4) product has been well-accepted – competition is some way behind the initiative

Proshare Nigeria Pvt. Ltd.

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