Economy
CCNN: Upward Revision to Estimates on Strong 9M-17 Results
We revise forecasts for CCNN following impressive 9M-17 results, and roll forward estimates and valuation to 2018. On net, we raise our TP for the stock by 28% to NGN9.52/share and upgrade rating to HOLD.
The revision to our estimates was driven by improved EBITDA and EBITDA margin (+113% and +774 bps respectively in 9M-17) on (1) higher realized sales volume and stronger selling price and (2) improved energy cost (-10% YtD and -35% q/q cost/tonne in Q3).
On net, we raise our EBITDA and net profit forecasts by 33% and 38% respectively for 2017F, and by 14% and 16% average respectively for 2018-2019F.
CCNN’s annualized 9M-17 EBITDA and net profit are 38% and 36% ahead of Bloomberg’s consensus’ 12-month estimates.
We increase sales volume and price forecasts for 2017 by 6% and 9% respectively, equating to -16% (previously -20%) and +58% (previously 44%) from 2016. The revised volume estimate follows strong growth in Q3 (we estimate +26% q/q and +13% y/y) achieved on the back of lower prices (by N50/bag compared to Q2-17, using ASHAKACEM’s prices as proxy).
Discount on cement sold by CCNN in Q3-17 alone was NGN580 million, compared to NGN332.9 million in H1-17. Following the contraction in 2017, we forecast sales volume will grow by 2% in 2018 and flattish in 2019 on estimated 85% plant utilization rate. Compared to 2017, outlook for national cement consumption is modestly optimistic. Our estimated utilization rate also considers less production disruption from better energy availability on significantly reduced demand from the bigger players and less volatile prices on stable FX.
Those said, CCNN’s lower volume growth estimate compared to the industry (+9% average), reflects the capacity constraint challenge facing the company. At 9M-17 run-rate, we estimate CCNN’s 0.5Mts/year plant capacity is already running at 83% utilization for 2017F.
Notwithstanding the expected modest recovery of consumption, the outlook for cement selling prices remains positive. The market leaders have repeatedly communicated intent to maintain stable prices, and the nature of the Nigerian cement market makes this realizable.
More positive for CCNN is that the current NGN45,997/tonne selling price (vs. NGN43,705/tonne in 9M-17), assuming unchanged next year, translates to 2% gain over our estimated 2017 average of
NGN44,920/tonne.
Compared to Q2-17, we estimate that CCNN achieved 35% decline in per tonne energy cost in Q3-17. This, in our view, was significant in the surprised 938 bps q/q gross margin expansion achieved during the period. Outlook for the price of CCNN’s type of energy is positive, on significantly reduced demand from the bigger consumers in the cement industry and positive feed-through from stronger one-year naira outlook.
Downside risk, however, is the potential increase in the unregulated LPFO price, on rising crude oil price; hence, our EBITDA margin estimates of 23% average for 2018-2019F (albeit above 5-year average of 17%), vs. 27% for 2017F (on the backdrop of the 33% margin achieved in Q3).
Media reports have recently quoted top management member of CCNN reiterating progress on expansion work (additional 1.5Mts/year to increase capacity to 2Mts/year) in Sokoto and guiding to delivery in 2018. While noting the significance of the delivery of additional volume on EBITDA formation going forward, we are still reluctant to factor the expansion into our model, given that the company’s recent financials (balance sheet and cash flow statements) are yet to capture the movement of capital to support management’s claim.
By Adedapo Adesanya
The Nigeria Revenue Service (NRS) says the rollout of electronic invoicing (e-invoicing) will strengthen tax compliance, curb revenue leakages and improve transparency in tax administration as it moves to fully digitise the country’s tax system.
The Project Lead for the NRS e-Invoicing Project, Mr Mohammed Bawa, stated this at the DigiTax E-Invoicing Compliance Breakfast Session held in Lagos on Wednesday.
The event, organised by DigiTax, an NRS-accredited e-invoicing platform, formed part of efforts to support the agency’s ongoing education and sensitisation campaign on the e-invoicing mandate.
Mr Bawa said the initiative aligns with global trends in tax digitisation and is expected to help improve Nigeria’s tax-to-GDP ratio, which remains one of the lowest in Africa.
According to him, the system will provide the NRS with greater visibility into transactions across sectors, formalise activities within the informal economy and standardise invoice formats nationwide using globally recognised invoice schemas.
He added that e-invoicing would improve operational efficiency for both businesses and tax authorities while supporting the NRS’ transition from manual and electronic tax administration processes to a fully automated system-to-system interaction model.
Mr Bawa noted that the legal framework for implementation is backed by the Nigeria Tax Administration Act, which prescribes penalties for non-compliance.
He disclosed that the NRS has completed onboarding large taxpayers and is preparing to enforce compliance with defaulting entities.
According to him, medium taxpayers are expected to begin compliance in the third quarter of 2026, while onboarding of emerging taxpayers will commence in 2027, with full adoption targeted for all taxpayers by the end of 2028.
Mr Bawa urged taxpayers yet to be onboarded onto the platform to begin the process and work with accredited service providers to ensure compliance.
On his part, Country Director of DigiTax Nigeria, Mr Olumide Akinsola, urged businesses to look beyond their internal systems and assess the compliance status of suppliers and counterparties.
He warned that businesses whose suppliers fail to transmit invoices through the MBS platform risk losing eligibility to claim Value Added Tax (VAT) input credits on such transactions, describing the resulting supply chain exposure as a significant commercial risk that many organisations have yet to quantify.
Mr Akinsola also announced the launch of DigiTax’s white paper, The State of E-Invoicing Readiness in Nigeria, which examines compliance adoption trends and the readiness gap across different taxpayer segments.
He added that DigiTax operates in Nigeria, Kenya, Zambia and the United Arab Emirates (UAE), noting that experience from those markets shows businesses that integrate early are better positioned to avoid disruptions when enforcement begins.
By Aduragbemi Omiyale
The names of about 100,000 companies registered by the Corporate Affairs Commission (CAC) are about to be deleted for inactivity, especially for failing to file their annual tax returns, Business Post reports.
This information was disclosed by the CAC via a notice signed by its management on Wednesday, July 15, 2026.
The list contains organisations like the Nigeria-Poland Chamber of Trade Invest Ltd, Alariwo of Afrika Ltd, Ovation Sports International, First Union Pension Fund Administrators, Investopedia Limited, Baptist High School Abuja Ltd, and Yobe Aluminium Manufacturing Industries Ltd, amongst others.
In the statement, the commission said its decision to strike off the names of the affected firms from the register aligns with the provisions of Section 692(3) (3) and (4) of the Companies and Allied Matters Act (CAMA), 2020.
However, the affected companies can still salvage the situation by filing all outstanding annual returns and regularising their records within 90 days.
“Please note that companies that fail to comply within the stipulated timeline shall be struck off the register without further notice,” it declared, expressing its continued commitment to providing prompt and efficient registration and regulatory services to the satisfaction of its valued customers.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange gained 1.75 per cent on Wednesday, July 15, pushing the NASD Security Index (NSI) up by 74.20 points to 4,316.51 points from 4,242.31 points, as the market capitalisation added N44.54 billion to finish at N2.590 trillion compared with the preceding session’s N2.546 trillion.
During the session, there was an 11.5 per cent rise in the value of transactions at midweek to N72.7 million from the preceding session’s N65.2 million, as there was a 3.7 per cent growth in the number of deals to 28 deals from the previous session’s 27 deals, while the volume of securities slumped by 64.5 per cent to 4.9 million units from 13.7 million units.
At the close of trades, Great Nigeria Insurance (GNI) Plc ended as the most active security by value on a year-to-date basis, with 3.4 billion units worth N8.4 billion, with the second spot occupied by Infrastructure Credit Guarantee (Infracredit) Plc after selling 2.3 billion units valued at N6.5 billion, and the third position was taken by Central Securities Clearing System (CSCS) Plc, which exchanged 74.3 million units for N5.3 billion.
GNI Plc also finished the trading day as the most traded stock by volume on a year-to-date basis, with a turnover of 3.4 billion units traded for N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units sold for N415.7 million.
Business Post reports that the market breadth index was negative yesterday, as there were two price gainers and three price losers.
11 Plc added N22.36 to its value to close at N250.00 per share versus N227.64 per share, and CSCS Plc improved by N7.95 to N90.35 per unit from N82.40 per unit.
On the flip side, FrieslandCampina Wamco Nigeria Plc lost N1.37 to end at N150.00 per share versus N151.37 per share, UBN Property Plc depreciated by 6 Kobo to N1.75 per unit from N1.81 per unit, and Food Concepts Plc dropped 1 Kobo to close at N2.49 per share versus N2.50 per share.
