Dangote Group reported its 1Q20 results, which saw group sales volumes decline by 0.6 per cent with the onset of the coronavirus in March. ICR now looks deeper at the regional breakdown of the company’s results.
The domestic Nigerian market saw temporary restrictions imposed only in the last week for the COVID-19 outbreak and therefore, cement volumes were not much affected in the 1Q20. However, sales volumes in April were trending lower. Still, Dangote estimates consumption was up five per cent in the 1Q20 compared to the 1Q19. Overall, the company’s Nigerian operations sold more than 4Mt, up 0.7 per cent on the 1Q19. Revenues also increased by 5.6 per cent to NGN179.3B (US$4.59B), while EBITDA reached NGN103.4. Average prices were up by five per cent YoY.
The pan-African region saw volume growth in six of nine Dangote operations. March saw a countrywide lockdown in South Africa, Congo and Ghana, with a partial lockdown in Sierra Leone and Senegal. The region sold 2.28Mt of cement in 1Q20, down 2.9 per cent in the 2.35Mt in the 1Q19. EBITDA was a record high of B, up 23.4 per cent YoY, supported by strong performances in Ethiopia, Senegal Cameroon, Ghana, Sierra Leone and Congo as well as higher pricing in Zambia.
Dangote Cement estimates Cameroon’s cement market was about 0.82Mt in the 1Q20, driven by individual construction projects, government housing estate projects and the continuation of the African Cup of Nations. The 1.5Mta grinding facility in Douala sold 0.31Mt of cement in the 1Q20, an increase of 4.3 per cent when compared with the 1Q19 and the company has a ~38 per cent market share in Cameroon.
Republic of Congo
The market size of the Republic of Congo was about 0.19Mt in the 1Q20 and the 1.5Mta Mfila cement plant sold just under 74,000t of cement in the period, up 25 per cent YoY. Growth was aided by a new depot in the north region and market share grew to 40 per cent. The lockdown was extended to 10 May in this country.
The Ethiopian market was about 2Mt in the 1Q20 and sales at the 2.5Mta Mugher factory reached 0.56Mt, up six per cent YoY, with a market share of 28 per cent.
Dangote Cement sold more than 124,000t of cement in Ghana in the 1Q20, a rise of six per cent compared to the 1Q19. The company has a domestic market share of seven per cent.
Senegal’s market is a growth area where a larger middle class and decentralisation are aiding several cities and zones to be built. Sales from the Pout plant reached 0.4Mt in the 1Q20, up by 5.4 per cent YoY, while the company’s market share grew to 21 per cent.
Sierra Leone’s market has been bolstered by infrastructure spending and foreign aid enabling the resumption of building projects. The country consumed 0.18Mt of cement in the 1Q20 and Dangote’s share rose to 37 per cent with volumes reaching 67,000t.
South Africa has low spending in large infrastructure projects and depressed demand for residential construction. The government lockdown came into effect on 27 March to stop the spread of COVID-19 and was extended to 1 May when phased easing began. The company’s sales volume fell by one per cent in the 1Q20.
In contract Tanzania is seeing robust growth in infrastructure and housing and major projects for road, rail and airports. The market is estimated at 1.4Mt in the 1Q20 and the Mtwara factory sold 0.2Mt of cement and 0.24Mt of clinker in the period. This was 13 per cent lower than in the 1Q19, and was due to production challenges that reduced daily volumes. The company has a 17 per cent share of the market. Dangote Cement also faced delays on the construction its new power plant during the 1Q20 due to the coronavirus.
Zambia’s cement market fell by 25-30 per cent in the 1Q20 impacted by the depressed economic environment. The Ndola factory sold just over 0.13Mt of cement in the quarter, down 39 per cent YoY. A 44 per cent price increase in local currency improved profitability and the Ndola plant has about a 27 per cent share of the market.
In general, manufacturing costs rose in the period by 4.9 per cent to NGN104.3bn, mainly as a result of an increase in Nigerian manufacturing costs. Selling and distribution costs in Nigeria advanced to NGN31.8bn in the 1Q20. These costs were in part offset by the decrease in pan-African selling costs, as a result of reduced haulage costs in Tanzania and Zambia, due to the reduced volumes compared to the 1Q19.
Group revenue rose by 3.8 per cent for Dangote in the 1Q20, while group EBITDA increased by 2.2 per cent. Pan-African EBITDA increased by 23.4 per cent with a record high EBITDA margin of 20.9 per cent. Profit before tax rose 11.5 per cent YoY. Group volumes were flat at 6.3Mt.