Dangote revenues boosted by new capacities

Dangote revenues boosted by new capacities
18 May 2015

Dangote Cement reported a double-digit rise in first-quarter revenue, boosted by contributions from its new factories in Africa.

Group cement sales volumes rose by 3.4 per cent compared to the same quarter of 2014, with volumes from Senegal and Sephaku Cement offsetting a decrease in volumes in Nigeria. Group revenues rose by 10.8 per cent to NGN114bn, mainly due to higher revenues in South Africa and Senegal.

Nigerian cement volumes fell by 10.7 per cent during the first quarter but average prices rose by about 13 per cent. Consequently, revenues from Nigeria were down by 1.6 per cent from NGN99.8bn during 1Q14 to NGN101.4bn in 1Q15.

In west and Central Africa group region, Ghana contributed NGN3.1bn, Senegal NGN1.3bn and Cameroon NGN0.3bn. In South and East Africa, Dangote’s subsidiary Sephaku Cement began production at its Delmas milling plant in early 2014, with production at the Aganang integrated plant later in the year. Sephaku accounted for all NGN8.7bn of revenue from the South and East Africa region compared with NGN0.8bn in 1Q14.

Commenting on the results, Onne van der Weijde, Chief Executive, of Dangote Cement said: “Our African projects are now beginning to deliver revenue growth for the Group and even at this early stage we are seeing good potential in all the countries into which we are expanding. Senegal has made an excellent start, Cameroon is poised for a strong entry into an exciting growth market and Sephaku Cement is clearly shaking up the South African market as the first new entrant in many years.”

“Although sales fell in Nigeria, we improved both revenues and margins thanks to pricing actions in December following the collapse of the oil price and currency devaluation. We are making a significant investment to improve our logistical capabilities and I am pleased to report a much more favourable
fuel supply in the first quarter of 2015.

The Group posted an operating profit of NGN58.4bn, 7.1 per cent higher than the NGN54.6bn generated in 2014, with both non-Nigerian regions achieving profitability . The operating margin fell from 52.7% in 2014 to 50.9 per cent. in 2015

Profit before tax was NGN70.2bn, compared with NGN53.0bn for Q1 2014.The reallocation of production from Gboko to Obajana helped to reduce the tax charge by 71.3 per cent to NGN1.5bn during the quarter, with a consequent improvement in earnings.

The Group’s profit for the quarter was NGN68.6bn (2014: NGN47.6bn) resulting in earnings per share of NGN4.09 (2014: NGN2.80).


Market stable despite election delay, Gboko reopens
The total market for cement in Nigeria is estimated by Dangote to have been approximately 5.4Mt in 1Q15, slightly lower than the 5.5Mt sold in the same period of last year. The company believes that the delay to the general election was a significant factor, “causing some uncertainty that in turn affected decisions to buy cement for building,” it said.

Imports in the market remain low, and Dangote estimates that just 352,00t of cement were imported during the first three months of the year, only slightly higher than the 338,000t imported in 1Q14.

In March, the group raised the ex-factory price of cement to NGN1630/bag of 42.5 grade cement (excluding VAT), which equates to NGN32,600/t.

Almost all sales of cement during the quarter derived from the company’s Obajana and Ibese cement plants. Volumes fell by 10.7 per cent to 3.1Mt, with Dangote attributing the decline to delayed price increases by a competitor following its own price increases in December, which resulted in a temporary shift in market share in the first few weeks of this year. In addition, Dangote experienced some logistical issues, particularly in the south region, that hindered shipments to customers. As such, it has invested in new vehicles and expertise to ensure more efficient distribution in coming months.

The flagship Obajana works in Kogi state achieved sales of 2Mt (versus 1.9Mt in 1Q14). The gas supply to Obajana was substantially improved at 92 per cent in 1Q15 compared with 67 per cent in the previous year. The firm expects a much more stable gas supply at Obajana in 2015. Together with new coal facilities, use of LPFO was reduced from 32 to seven per cent at the works. Coal facilities for Lines 1, 2 and 4 are expected to e complete later in 2015, eliminating the need to use LPFO as a back up fuel to gas.

Sales volumes at the Ibese works increased by 19 per cent to around 1.1Mt. Although gas utilisation fell slightly from 92 per cent in 1Q14 to 85 per cent in 1Q15, the new coal facilities reduced LPFO use to zero. Work has begun on coal grinding facilities for Ibese’s new Lines 3 and 4, with work expected to be complete in 2H15.

The Gboko works was mothballed in November 2014 following 9Mt of new capacity being brought on-stream at the Obajana and Ibese works. Gbolko sold just 13,000t of cement from existing stocks in 1Q15. To meet growing demand in its catchment area, the Gboko plant was reopened in April 2015.

West & Central Africa

Solid starts in Senegal and Cameroon, new additions in Ghana

Dangote’s West & Central Africa region sold 227,000t of from its facilities in Ghana, Senegal and Cameroon (1Q14: 154,000t).

The company said its new 1.5Mt factory in Senegal has made a solid start and it expects production to be ramped up in the coming months.

Ghana, however, remains a challenging market because of currency devaluations and imports. Dangote is continuing to improve facilities at its import and bagging facility in Tema and has appointed Tor Nygard (formerly MD of Ghacem) as a new plant director. Improvements at Tema include larger storage silos and additional packing lines. The upgrade is expected to be finished in July. In addition, Dangote has now finalised the contract to build the 1.5Mt grinding plant that will be established at Takoradi.

The new 1.5Mta cement - grinding facility in Cameroon began operation in March and therefore made a small contribution to regional volumes sold during the quarter.

South & East Africa

Sephaku continues to make good progress
All regional revenues came from the sale of more than 460,000t of cement in South Africa, up from 370,00t in the final quarter of 2014.

The 1.5Mta plant at Ndola in Zambia has ignited its kiln and is undergoing production trials. Because of heavy rains in the area Dangote has experienced some waterlogging at Nodola’s quarry but have secured ample limestone from other Zambian sources in the meantime.

At Mugher in Ethiopia the 2.5Mta plant is also undergoing commissioning, with the milestone of kiln ignition having been achieved in April.

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