Improvement in capacity drives DangCem strong performance

Proshare

Thursday, November 28, 2013 / DLM Research

9M 2013 revenue grows by 28.73% and post-tax profit increases by 45.83% y/y.
Dangote Cement Plc (DCP) – in its nine months results to September 2013 – reported sales revenue and post-tax profit of N288.98billion and N156.13billion respectively, an increase of 28.73% and 45.83% from N224.49billion and N107.06billion posted in the same period of 2012. The firm‘s sales revenue in 9M 2013 – its highest post-listing 9M sales – reflects improvements in production and capacity utilization rates, sales volumes and market share as well as the continued success of its direct-to-customer delivery strategy. Meanwhile, according to management, DCP commissioned the 1 Million Tonnes (MT) extension of Gboko cement plant in Q3 2013, bringing installed capacity at the plant to 4 Million Tonnes (MT). Aggregate installed capacity across DCP‘s three plants now stands at 20.25 MT and is expected to reach 29.25MT upon completion of Obajana line 4 (capacity 3MT) and Ibese lines 3 and 4 (capacity 6MT).

Sales volumes at Obajana and Ibese were up by c.42.12% and c.47.22% in 9M 2013, with capacity utilization rates improving to c.76.97% and c.67.03% respectively. Sales volumes, however, were down by c.23.01% at Gboko cement plant on the back of low capacity utilization rate of 45.10% for the period. Overall, we estimate that DCP‘s market share for the period was c.66.51% (fig.6) while its Nigerian business contributed c.96.18% to group revenue.

Q3 2013 numbers sustain strong growth trend. Sales revenue and post-tax profit for Q3 2013 came in at N90.52billion and N48.67billion respectively. Sales revenue for Q3 2013, DCP‘s highest Q3 sales revenue in the last 3 years (fig.9), is 56.29% higher y/y and 12.15% lower q/q. Meanwhile, our analysis of the industry indicates that Q3 sales revenues have historically been the lowest in a given financial year for all cement producers due to the heavy rainfall that usually characterizes that period, which limits construction work and decelerates the demand for cement. Similarly, Q3 post-tax profit recorded a 55.94% y/y increase but dropped by 10.04% q/q. We expect an uptick in sales revenue and post-tax profit in Q4 2013, in response to the more favourable Q4 weather condition that encourages building and construction work and stimulates growth in cement demand.



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