Q1 2023 results of listed cement companies
The financial results of the three cement manufacturing companies in Nigeria -Lafarge Africa Plc, Dangote Cement and Bua Cement can give an indication of the health or otherwise of the construction sector. Over the next few pages, we present these results with commentary from stockbroking firms
Dangote Cement: Revenue down on reduced Production volumes.
Dangote Cement reported a marginal decline in Revenue by 1.6% y/y to N406.22bn in Q1 2023 from N413.18bn in Q1 2022 based on its recently released Q1 2023 results. On a q/q basis, performance was disappointing, as Revenue was down by 7.1% q/q from N441.07bn in Q4 2022. We attribute the decline in Revenue to the drop in the company’s production levels, which was down by 10.6% in Q1 2023 as the company continues to battle with worsened supply chain challenges.
Cost of Sales (adjusted for depreciation) was up by 5.5% y/y to N140.01bn in Q1 2023. The y/y growth in Cost of Sales (adjusted for depreciation) was mainly driven by other production expenses (111.2% y/y). Also marginal increases in Fuel & Power consumed (+2.2% y/y) and Plant maintenance cost (+8.8% y/y) contributed to the rise in Cost of Sales. Gross profit declined by 4.9% y/y to N266.7bn in Q1 2023 from N280.5bn in Q1 2022. Similarly, on a q/q basis, Gross profit declined by 8.2% to 266.71bn in Q1 2023 from N290.54bn in Q4 2022 while gross margin shrunk by 2.3ppt y/y to 67.9% in Q1 2023 from 65.6% in Q1 2022.
Operating Expenses (adjusted for depreciation) rose by 13.6% y/y to N82.20bn in Q1 2023 from N71.06bn in Q1 2022. The growth in Opex reflects the 16.9% y/y and 11.4% y/y growth in Selling & Distribution Expenses (adjusted for depreciation) and Administrative Expenses (adjusted for depreciation), respectively. Other Income rose by 45.2% to N1.48bn in Q1 2023. EBITDA declined by 11.9% y/y to N185.71bn in Q1 2023. Consequently, EBITDA margin contracted by 5.3ppts to 45.7% in Q1 2023 from 51% in Q1 2022. A 3.2% y/y rise in Depreciation & Amortisation to N28.84bn contributed to EBIT declining by 14.2% y/y to N157.88bn in Q1 2023.
Net Finance Cost declined by 16.5% y/y to N22.05bn in Q1 2023 from N26.41bn in Q1 2022. While Finance Cost was down 11.6% y/y to N36.8bn, Finance Income was up only 1.1% y/y to N10.47bn. Overall, Pre-Tax profit was down by 6.1% y/y to N146.82bn in Q1 2023 from N156.40bn in Q1 2022. The effective tax rate declined to 26.2% in Q1 2023 from 32.0% in Q1 2022. Given the 26.2% y/y decrease in Tax Expense, growth in Net Income improved, rising by 4.01% y/y to N109.50bn in Q1 2023 from N105.9bn in Q1 2022. Overall, Earnings per Share settled at N6.44/s in Q1 2023 compared with N6.18/s in Q1 2022.
We have a target price of N372.49 for Dangote Cement with a BUY recommendation. Current price; N270.00/s.
Source: www.finance.infowarelimited.com