Dangote Cement: Sustained Demand Drives Growth

Kayode Tokede 

Dangote Cement Plc recently released its full year ended December 31, 2021 financials, which showed remarkable growth in revenue to N1.38 trillion, an increase of 34 per cent from N1.03 trillion reported in full year ended December 31, 2020.

The growth in revenue impacted positively on profit before tax that grew by 44.2 per cent to N 538.4 billion in 2021 from N373.3 billion reported in 2020 and 32 per cent increase in profit after tax to N364.44 billion in 2021 from N276.07 billion in 2020.

The cement manufacturing company 2021 performance was largely driven by higher sales volumes, as well as improved cost management during the period, which drove margin expansion.                     

During the full year ended December 31, 2021 period, Daognte cement revenue increased by 34 per cent, supported by 51,550’000 tonnes   surge in Cement production and bagging capacity volumes in 2021 as against 48,550’000 tonnes recorded in 2020.

The company’s sales volumes rose by nearly 14 per cent to 29,271’ 000 tonnes in 2021 from 25,7200’000 tonnes reported in 2020.

Disaggregation of revenue from contracts with customers revealed that domestic sales (Nigeria) grew by 32 per cent to N1.33trillion in 2021 from N1.01trillion recorded in 2020 as export sales closed 2021 at N64.51billion, an increase of 31 per cent from N30.64billion reported in 2020.

The breakdown revealed that domestic sales in Nigeria grew by 35 per cent to N956.96 billion in 2021 from N709.09 billion in 2020, while domestic revenue generated from Pan African countries gained 23.5 per cent to N369.3 billion in 2021 from N298.9 billion in 2020.

The substantial growth in 2021 reflects sustained strength in construction activities post-Covid pandemic in Nigeria and Sub-Saharan Africa, which continues to spur cement demand across Dangote Cement markets.

 The Cement manufacturing company recorded a 26per cent increase in Cost of Sales during the period to N551.02 billion from N437.97 billion reported in 2020.

As expected, the pressure on Cost of Sales mostly emanated from material consumed, Fuel & power consumed and plant maintenance costs. In the year under review, Dangote Cement reported nearly 30 per cent increase in material consumed to N175.4 billion in 2021 from N134.9 billion in 2020, while fuel & power consumed grew by 34.4 per cent to N196.6 billion in 2021 from N146.34 billion in 2020. In addition to production cost of sales, plant maintenance also grew by 37 per cent to N42.2 billion in 2021 from N30.7 billion in 2020.

This was a consequence of Naira depreciation in Nigeria, persistent price pressure on energy sources and production inputs. As revenue growth outpaced growth in Cost of Sales, Gross Profit grew by 40 per cent to N832.62billion in 2021 from N596.23 billion in 2020 as Gross Margin expanded to 60.2 per cent 2021 from 57.7 per cent in 2020.

gross margin came under

Dangote Cement’s gross margin came under more pressure from energy costs in second quarter of 2021 at 58.6 per cent compared with 61.5per cent in first quarter of 2021), which was attributed to global supply chain bottlenecks which impacted freight costs of imported energy (coal) and material (gypsum) inputs.

Over 2021, total operating expenses (OPEX) grew by nearly 20 per cent to N256.01 billion in 2021 from N214.06 billion in 2020 owing to a 25 increase in selling and distribution expenses that closed 2021 at N191.7 billion from N153.7 billion in 2020, and a seven per cent rise in Selling and distribution costs that moved from N60.34 billion in 2020 to N64.35 billion in 2021.

However, as Gross Profit growth printed ahead of OPEX growth, Dangote Cement proved operationally efficient with OPEX/Sales ratio contracting from 21.24 per cent in 2020 to 19.3 per cent in 2021.  Non-core business income grew by 31 per cent to N6.2 billion in 2021 from N4.75 billion in 2020.

In all, the Group reported 51per cent increase in profit from operating activities to N582.49 billion in 2021 from N386.7 billion in 2020.

Rising debt burden amid growth in profits

In 2021 financial year, Dangote Cement reported 30.4per cent decline in finance income to N20.77billion from N30.35billion in 2020, finance cost grew significantly by 49.4 per cent to N65.71billion in 2021 from N43.99billion in 2020. The growth in finance costs was driven by 24.3 per cent increase in interest expenses on borrowed funds to N57.17billion in 2021 from N46 billion in 2020.

In 2021, Dangote Cement had successfully raised a N50 billion bond in 3 tranches with a maturity profile of 2024-2028, under the N300 billion bond purchase programme.

Increase in bank loans

The new issuance, alongside an increase in bank loans, drove net interest bearing debt to N582.2 billion (compared with N501.7billion by 2020).

Meanwhile, profit before tax for the year grew by 44 per cent to N538.4 billion in 2021 from N373.31billion in 2021.

 Dangote Cement paid a tax charge of N173.93 billion in 2021, an increase of 78.7 per cent over N97.24 billion in 2020 to position profit after tax by 32 per cent growth from N276.1 billion in 2020 to N364.44 billion in 2021.

Dangote Cement, thus, 2021 with earnings per share (EPS) of N21.24 from N16.14 as the management proposed a dividend of N20.00 per share.

The Chief Executive Officer, Dangote Cement Michel Puchercos in a statement said, “We are pleased to report a solid set of the results for the full year 2021. Group volumes for the year were up 13.8 per cent and Group EBITDA was up 43.2 per cent, to N684.6 billion at a 49.5 per cent margin.

“I am delighted to report that Dangote Cement experienced its strongest year across all line items, with a record PAT of N364.4 billion up 32per cent.”

 “Our business model remains robust, thanks to the prudent and flexible approach we have taken across

our operations. Due to an increased focus on efficiency while meeting double-digit market growth and maintaining costs under control, Dangote Cement has and will consistently deliver superior profitability and returns to its shareholders,” he added.

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