THUR 25 MARCH, 2021-theGBJournal- Dangote Cement Plc (DANGCEM) published FY-20 audited financials after Tuesday, reflecting impressive earnings as PAT rose by 37.7% y/y to NGN276.07 billion in FY-20 while EPS grew by 36.9% y/y to N16.14.
-Group revenue increased by 16% to ₦1,034 billion (2019: ₦891.7 billion).
-Company revenue increased by 18% to ₦720 billion (2019: ₦610.3 billion).
-Group net profit increased by 38% to ₦276.1 billion (2019: ₦200.5 billion).
-Company net profit increased by 35% to ₦352.6 billion (2019: ₦261.4 billion).
-Group earnings per share increased by 37% to ₦16.14 (2019: ₦11.79).
-Company earnings per share increased by 35% to N20.69 (2019: ₦15.34).
The board has proposed a final dividend of NGN16.0/s (same as in the prior year), which implies a dividend yield of 7.3% based on the last closing price of NGN220.00.
The group’s aggregate revenue grew by 16.0% y/y to NGN1.03 trillion in FY-20, driven by revenue improvement from its Nigerian operations (+18.0% y/y) and Pan African operations (+12.7% y/y). DANGCEM is now the third listed entity on the NSE to have achieved the N1 trillion mark aside from MTNN and AIRTELAFRI.
The topline growth in Nigeria was driven by volumes (+12.9% y/y to 15.9MMT) compared to the increase in price per tonne (+4.5% y/y). On Pan African Operations, the translation impact arising from the Nigerian naira’s devaluation was the primary catalyst behind the topline expansion of 12.7% y/y, as sales volumes rose by 4.4% y/y to 9.9MMT. The group’s overall sales volume increased by 8.6% y/y to 25.7MMT in FY-20. We note that Q4-20 revenue grew slower by 28.7% y/y (vs 34.2% in Q3-20), reflecting the dissipating effect of the pent-up demand for cement that ensued following the relaxation of lockdown measures in Q2-20.
Although the 18.5% y/y increase in the cost of sales (ex-depreciation) outpaced the expansion in revenue (+16.0% y/y), group EBITDA grew by 20.5% y/y in FY-20, on the back of the 2.6% y/y sub-inflationary growth in operating expenses (ex-depreciation) and a 44.0% y/y increase in the other income line. Similarly, the EBITDA margin rose by 1.7ppts to 46.1% in FY-20. On a geographical basis, Nigeria EBITDA margin weakened by 0.7ppts to 58.5% due to the pass-through effect of the local currency’s devaluation on dollar-linked cost items. This is evidenced in the surge in energy cost (+38.9% y/y in FY-20) compared to the increase in volumes (+18.0% y/y).
On the other hand, Pan African Operations EBITDA strengthened by 5.5ppts to 22.4% in FY-20, the highest on record and substantially above the four-year average of 15.6%. According to management, this was due to cash cost improvement in 7 of its 9 Pan-African operations.
Further down, earnings received a boost from the moderation in net finance cost (-71.7% y/y) in FY-20. This was supported by the blend of the higher interest income (+73.2% y/y), a foreign exchange gain of NGN16.63 billion in FY-20, which was absent in FY-19, and the high base finance cost in FY-19 due to foreign exchange losses of NGN13.48 billion. Adjusting for the impact of the FX gain in FY-20 and FX loss in FY-19, net finance cost would have declined by 15.8% y/y in FY-20.
Net operating cash flow (NOCF) rose by 20.1% y/y to NGN511.88 billion in FY-20, driven by efficient working capital management as inventories declined by 5.7% y/y while trade payables rose by 22.2% y/y. The growth in NOCF supported the increase in cash and cash equivalents (+25.8% y/y to NGN141.04 billion) which proved instrumental in the double-digit expansion in finance income (+73.2% y/y) despite the lower yield environment in 2020.
Overall, PBT grew by 49.0% y/y in FY-20 with related PBT margin improving by 8.0ppts to 36.0%, on the back of the moderation in net finance cost and gains from cost management. Following a higher tax charge (NGN97.24 billion in FY-20 vs NGN49.96 billion in FY-19), PAT grew slower by 37.7%.