July 20, 2018/FBNQuest Capital Research
Event: Dangote Cement reports weaker-than-expected Q2 2018 results.
Implications: On an annualised basis, Q2 sales and PBT came in slightly behind consensus estimates of N965bn and N371bn respectively. As such, we anticipate moderate downward adjustments to consensus 2018E PBT forecast. However, we expect a negative reaction by the market on the back of the relatively weaker profits delivered this quarter.
Positives: Q2 sales of N240bn were up 18% y/y, driven primarily by unit volume growth of c.12.5% y/y to c.6.2 million tonnes. On a segmental basis, sales in Nigeria which were up 22.4% y/y to N170bn. We anticipate consistent volume growth through H2 following the approval and passage of the 2018 federal budget. Other positives were a gross margin expansion of +217bp y/y to 58.3% and a 282% y/y rise in other income.
Negatives: Q2 PAT came in behind our estimate by c.37%. The main driver behind this variance was a negative surprise on the net finance expense line on account of fx-related losses of –N15.4bn. According to management statements, fx gains recognised in 2017 were reversed due to a restatement of results. Operating expenses were up 30% y/y and 10% q/q to N45bn.
Dangote Cement Q2 2018 results vs. FBNQuest Capital estimates