Economy
Dangote Cement: Q3-17 PAT; Below Expectation, But Strong
By Cordros Research
Dangote Cement released its Q3-17 results on Friday, showing revenue (27.4% y/y), EBITDA (95.1% y/y), and PAT (63.1% y/y) all grew strongly at the Group level. Revenue was below our estimate by 6% while EBITDA (on lower other incomes) and PAT (on significantly higher tax charge) lagged by 12% and 16% respectively. Compared to Q2-17, decline was recorded across all line items –revenue (-6.7%), EBITDA (-10%), and PAT (-33%).
The revenue growth was underpinned by higher average prices (40% y/y), which more than compensated for the decline in volume (9% y/y). Compared to Q2-17, volume was lower by 12% while price increased by 6%.
Expectedly, the Group volume was dragged mainly by the Nigerian operation, wherein sales fell by 11.8% y/y and 10% q/q on (1) still higher prices (55% y/y, but-0.3% q/q), (2) weak construction activities nationwide, and (3) longer rainy days.
The non-Nigerian volume fell by 5% y/y and c.15% q/q, amidst 19% increase (y/y and q/q apiece) in average realized prices.
The Group gross margin (GM) of 56.9% – consistent with our estimate – was ahead of Q3-16’s (38.3%), and slightly improved from the 56.1% reported in Q2-17.
Gross margin in Nigeria remained well-above the previous year’s figure, but declined marginally relative to Q2-17, on lower price and slightly higher per tonne production cost.
To be specific, raw materials cost in Nigeria increased by 30% q/q. On the other hand, Non-Nigerian gross margin increased by more than 800 bps y/y and q/q apiece, as higher price more than offset the marginal increase (5% y/y and q/q each) in per tonne production cost.
Group opex rose by 14% y/y and 16% q/q. In Nigeria, opex remained well contained while sharp increases (27% y/y and 51% q/q) were recorded overseas.
At the Group level, the EBITDA margin of 47.5% was higher by 1649bps y/y, with Nigerian realized 62.4% EBITDA margin coming above Q3-16 (38.5%) but lower than Q2-17 (63.7%) rates. Notably, both EBITDA and EBITDA margin grew y/y and q/q for the Non-Nigerian operation.
Group net finance cost of N5 billion was reported, comprising pan-African net cost of N12.5 billion (vs. N26.4 billion in Q2-17) and Nigerian net income of N7.4 billion (vs. N24.4 billion in Q2-17).
The Nigerian operation reported forex gain of N5.4 billion (vs. N21 billion in Q2-17) during the period. The Group finance income and cost items reflect the movement in the naira exchange rate from N245/USD average in 9M-16 to N314/USD in 9M-17.
A tax charge of N15.5 billion was reported by the Group during the three months period, from a credit of N6.3 billion the previous year. This equates to an effective rate of 24%, the Group’s highest since Q2-16, and is linked to the Nigerian business, wherein effective tax rate was c.18% (highest since Q4-14), from 5% in Q2-17.
Management had guided to a higher Nigerian ETR over 2017 (with some plants having come out of pioneer status), but the rate reported during the review period is surprising.
Notwithstanding the lower-than-expected Q3 earnings, DANGCEM’s performance over the nine months of 2017 was very strong, and consistent with the broadly expected impressive year for the Group. We look for positive investor reaction to the result. Our estimates are under review.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rose by 2.30 per cent, spurring the NASD Security Index (NSI) to close higher by 96.61 points to 4,296.34 points from 4,199.73 points, and raising the market capitalisation by N57.99 billion to N2.578 trillion from N2.521 trillion.
The market was up yesterday despite a lower activity level, as the volume of securities traded slumped by 94.7 per cent to 1.3 million units from the previous 23.9 million units. The value of securities slipped by 57.2 per cent to N29.2 million from the preceding session’s N68.2 million, while the number of deals executed by market participants increased by 6.7 per cent to 32 deals from the 30 deals carried out on Thursday.
At the close of transactions, Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with a turnover of 3.4 billion units worth N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units valued at N6.5 billion in trades, and Central Securities Clearing System (CSCS) Plc with 70.8 million units traded for N4.9 billion.
GNI Plc was also the most traded stock by volume on a year-to-date basis, with 3.4 billion units sold for N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
During the trading day, there were three price gainers and two price losers, led by Afriland Properties Plc, which shed N1.48 to sell at N15.17 per share compared with the previous session’s N16.65 per share, and Food Concepts Plc, which slid by 7 Kobo to close at N2.69 per unit versus N2.76 per unit.
Conversely, FrieslandCampina Wamco Nigeria Plc improved its value by N9.50 to trade at N150.00 per share compared with Thursday’s closing price of N140.50 per share, CSCS Plc went up by N7.95 to N89.65 per unit from N81.70 per unit, and 11 Plc soared by N6.94 to N206.95 per share from N200.01 per share.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited lost its footing by 0.07 per cent on Friday as a result of renewed profit-taking by investors.
The fall happened after Thomas Wyatt and Guinness Nigeria led other price losers group comprising 27 stocks at the market yesterday due to selling pressure.
Thomas Wyatt Nigeria shed 10.00 per cent to quote at N2.70, Guinness Nigeria drowned by 9.99 per cent to close at N329.00, Ikeja Hotel slipped by 9.96 per cent to N42.50, Zichis shed 9.94 per cent to trade at N26.37, and McNichols depreciated by 9.91 per cent to N5.00.
On the flip side, International Breweries gained 9.92 per cent to finish at N13.30, NEM Insurance appreciated by 9.61 per cent to N27.95, Jaiz Bank grew by 6.36 per cent to N9.20, UPDC expanded by 6.33 per cent to N4.20, and Livestock Feeds increased by 6.32 per cent to N9.25.
Business Post reports that investor sentiment remained bullish despite the loss recorded during the session, as there were 27 price decliners and 30 price advancers, representing a positive market breadth index.
Yesterday, market participants transacted 441.3 million equities for N19.4 billion in 44,938 deals compared with the 1.7 billion equities worth N112.0 billion traded in 44,780 deals a day earlier. This showed that the trading volume contracted by 74.04 per cent, the trading value declined by 82.68 per cent, and an uptick in the number of deals by 0.35 per cent.
Access Holdings led the activity chart on Friday after selling 40.2 million shares valued at N1.0 billion, Sterling Holdco traded 30.3 million stocks worth N228.8 million, Fidelity Bank sold 26.3 million equities for N505.6 million, Zenith Bank transacted 22.3 million shares valued at N2.5 billion, and First Holdco exchanged 19.0 million stocks worth N1.3 billion.
During the last trading session of the week, the consumer goods sector rose by 0.49 per cent, the insurance counter increased by 0.06 per cent, and the industrial goods index closed flat, while the banking and energy indices lost 0.78 per cent and 0.52 per cent, respectively.
As a result, the All-Share Index (ASI) shrank by 159.97 points to 243,798.76 points from 243,958.73 points, and the market capitalisation moderated by N103 billion to N156.445 trillion from N156.548 trillion.
By Adedapo Adesanya
The Naira performed poorly against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, July 10, losing N1.19 or 0.09 per cent to close at N1,379.62/$1, in contrast to Thursday’s exchange rate of N1,378.43/$1.
It also depreciated against the Pound Sterling in the official market during the trading session by N3.80 to trade at N1,850.62/£1 compared with the previous day’s N1,846.82/£1, but gained 43 Kobo on the Euro to sell at N1,575.66/€1 versus the preceding day’s N1,576.09/€1.
At the GTBank FX desk, the Naira weakened against the Dollar yesterday by N1 to quote at N1,386/$1 compared with the previous session’s N1,835/$1, and maintained stability in the black market at N1.400/$1.
Data showed that interbank FX turnover fell by about 10 per cent on Friday to $71.044 million from $78.708 million the previous day. Also, interbank forex market deals reduced to 87 from 106 trades executed at the window on Thursday.
The total forex inflows into the Nigerian foreign exchange market have been fluctuating, with about $1 billion in total inflows reported last week.
Total FX inflows settled at $0.99 billion last week, according to the research subsidiary of Coronation Merchant Bank, with Foreign Portfolio Investors (FPIs) accounting for the largest share at 35.81 per cent, or $0.35 billion.
Exporters accounted for 28.72 per cent or $0.28 billion, while the CBN contributed 11.15 per cent or $0.11 billion. Non-Bank Corporations also made up a notable 10.92 per cent of total inflows, reflecting continued support from both market-driven and official sources.
In the cryptocurrency market, Bitcoin rose above $64,100, retesting the price level that rejected it on Monday, with a clean break above, opening the path toward the June 15 high of $67,250. It gained 0.3 per cent to sell at $64,114.16.
Ethereum (ETH) appreciated by 1.6 per cent to $1,798.81, Dogecoin (DOGE) grew by 0.6 per cent to $0.0742, Binance Coin (BNB) added 0.6 per cent to sell for $576.47, Cardano (ADA) also grew by 0.6 per cent to $0.1674, and Ripple (XRP) jumped by 0.4 per cent to $1.10.
But Solana (SOL) lost 1.1 per cent to settle at $77.95, and TRON (TRX) declined by 0.2 per cent to $0.3296, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
