H1:2023 DANGCEM Earnings Note | FX Devaluation Erodes Bottom-Line Performance
Higher Revenue Riding on Pricing Strategy
Dangote Cement Plc. recently released its H1:2023 financial results, depicting a 17.67% YoY growth in revenue to NGN950.83bn. This is amid a decline (-5.53% YoY to 13.4Mt) in sales volume during the period. We opine that the increase in revenue is associated with a strategic upward price review by the company’s management. We believe the management will sustain revenue growth through strategic pricing and improved sales volume.
Net Exchange Loss on Foreign Denominated Transactions Erodes Profits
Net Exchange loss on foreign denominated transactions spiked 179.47% YoY to NGN113.63bn in H1:2023 (vs. NGN40.66bn in H1:2022). This is following the FX liberalization policy enacted by the new administration in Nigeria. For context, its Q2:2023 stand-alone financial statement revealed a 362.79% YoY Jump in net exchange loss on foreign denominated transactions to NGN103.84bn in Q2:2023. Consequently, Profit Before Tax (PBT) declined by 9.45% YoY to NGN239.86bn in H1:2023 while Profit After Tax (PAT) grew marginally by 3.78% YoY to NGN178.60bn in H1:2023. Barring any further significant Naira devaluations, Dangote Cement would continue to keep posting decent performance. Hence, we maintain our target price of NGN348.34.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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