Dangote Cement PLC [DANGCEM:NL], Africa’s largest cement conglomerate has just recorded a significant drop in its Q1 2016 net profit.
According to its Q1 result made available to the Nigeria Stock Exchange, Dangote’s gross revenue grew by 22.8% within the quarter to NGN 140 billion compared to NGN 114 billion recorded within the same period last year. The company cost of sales zapped its revenue with a growth of 59% which is NGN 62 billion compared to NGN 39 billion spent within the same quarter last year.
Dangote Cement’s operating expenses, selling and distribution expenses also increased significantly to impact its net profit for the quarter. The company’s other income fell by -82.8% to arrive at 222 million, this is a sharp drop from NGN 1.3 billion it earned within the same quarter last year.
Perhaps the company is deleveraging; its finance costs which was about 16 billion within the same quarter last year has come down to NGN 6 billion last quarter, a percentage decrease of 63%.
Because of the pressure on its revenue from expenses and cost of doing business, the Dangote cement’s net profit for Q1 2016 has fallen to NGN 52 billion. This represents a 25% drop in profit compared to NGN 68 billion declared within the same quarter last year.
The company is only declaring dividends of NGN 3.12 per share compared to NGN 4.09 declared within the same period last year.
Dangote Cement PLC is Africa’s largest manufacturer of cement by spread. Aliko Dangote, Chairman of Dangote Industries, recently secured a USD 2 billion loan from ICBC of China to construct two more cement factories in Nigeria, Benin, Ghana, Senegal, South Africa and Zambia. His expansionary plans will see Dangote Cement controlling over 40-60% cement supplies in the next decade.
However, slowing growth in Nigeria, Africa’s largest economy is grappling with diversifying away from crude oil. The reduction in government spending could further hurt Dangote Cement’s profitability in the coming quarters.
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