Dangote Cement Plc. Q1:2023 Earnings Note: Taking the Lead | Strong YoY Growth in Profit After Tax
Cash Crunch and Election Activities Weigh on Sales Volume
Q1:2023 started on a rather bumpy note for Dangote Cement Plc. following a (-1.56% YoY) slowdown in Revenue from NGN413.18bn in Q1:2022 to NGN406.72bn in Q1:2023. Also, Group Sales Volume declined 13.5% to 6.3Mt, (vs 7.2Mt in Q1:2022) an offshoot of Naira scarcity and electioneering activities that permeated the first quarter. Nonetheless, Pan-African Volumes edged higher by 8.9% to 2.6Mt. Nevertheless, when compared to the negative year-on-year profit after tax (PAT) of BUACement (-19.13% YoY to NGN26.8bn) and Lafarge (-14.94% YoY to NGN14.93bn), Dangote Cement was able to achieve a respectable bottom-line performance with a 3.45% YoY growth in PAT to NGN109.50bn from NGN105.85bn in Q1:2022.
OPEX Surge Amid Higher Haulage Expenses
Administrative expenses (adjusted for depreciation) increased by 25.83% YoY to NGN15.20bn. This growth can be attributed to the significant increases in bank charges (+222.43% YoY to NGN1.75bn), travel expenses (+32.81% YoY to NGN1.26bn), and general administrative expenses (+21.46% YoY to NGN1.91bn).Selling and Distribution Expenses (adjusted for depreciation) rose 13.61% YoY to NGN67.00bn during the quarter. This is on the back of the increase in Haulage Expenses (+17.97% YoY to NGN58.43bn) and Other Expenses (+63.78% YoY to NGN963mn).
Based on our analysis of various factors, we are reiterating our target price of NGN348.34 for Dangote Cement Plc. We anticipate continued solid growth in revenue despite the high pricing environment, and we also project a boost in sales volume in the second half of 2023 as economic activities rebound from the impact of cash scarcity and election uncertainties. In addition, the establishment of new grinding plants in Ghana (operation expected to commence by end of May 2023) and Cote d'Ivoire (operation expected to commence by Q4:2023) as well as the operation of the planned 6Mta Itori Plant, are expected to contribute to this growth.
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