NIGERIA | DANGCEM Plc | Earnings Flash | 19-Oct-2017 | Elixir Research

dangote cement

19 Oct NIGERIA | DANGCEM Plc | Earnings Flash | 19-Oct-2017 | Elixir Research

Dear Valued Investor,

DANGCEM just announced its 9 months 2017 result. The numbers are quite impressive from a year-on-year (y/y) perspective but weak when compared on a quarter-on-quarter (q/q) basis.

Major Highlights below:
• The cement giant recorded solid growth (36.5% y/y) in revenue to ₦603.57 billion for the 9M, though sales was down 6.7% y/y to ₦190.90 billion Q3’17 alone due to negative impact from the heavy rain pour in the third quarter. Volume sales was down to 5.0 million tons from 5.48 million tons in Q2-17.
• Gross profit margin expanded to 56.9% from 47.6% (9M-2016), due to a slower rise in cost of sales (up 12.16% y/y to ₦259.85 billion; down 8.3% q/q to ₦82.31 billion). However, gross margin was weak in Q3, down 77 bps to 56.12%.
• EBITDA margin improved to 48.8% from 40.4% for the 9 months despite the jump in OPEX 23.4% to ₦113.50 billion. Q/q, OPEX increased by 15.9% to ₦40.66 billion.
• Due to the higher net finance charge in Q3’17 (₦5.04 billion; Q2’17 ₦1.99 billion), PBT was down 17.5% q/q to ₦64.60 billion (9M’17 ₦220.18 billion, up 48.1% y/y).
• More still, tax expense of ₦15.51 billion (up 223.6% q/q) for the quarter—effective tax rate of 24.01%, was depressing for PAT at ₦49.09 billion (down 33.2% q/q) though up y/y by 44.7% to ₦193.14 billion.
The Q3 standalone performance of DANGCEM is quite unimpressive. The numbers took a hit from lower sales volume due to the heavy rainfall, higher net finance and tax charge for the period. That said, the company is still on track to meet full year expectations. We expect market to focus more on the year-on-year trend and as such, the share price should not see downward repricing.
Kindly find below the snapshot of the result.