Key highlights of Dangote Cement Plc and Lafarge Africa Plc Q3 2018 Conference Calls

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October 23, 2018/Cordros Update


DANGCEM published 9M 2018 results yesterday. The group has grown EBITDA by 15% and PAT by 3% in nine months. Earnings growth by the end of 2018 will be much stronger, (1) adjusting for the one-off 84% effective tax charge in Q4 17 and (2) upon receipt of approval for waivers vis-à-vis the pioneer tax incentive in Nigeria.

Management sounded quite satisfied with the performance in today’s conference call, the key points of which we highlight below:

  • The group has received confirmation of pioneer tax application in Nigeria, and expects to receive the accompanying certificate by end of October 2018
  • Pioneer tax impact will likely be a reduction in effective tax from 28% as at 9M-18 to 15% by end-2018
  • Ghana operation now has a new management, and a number of cost containment programmes are in place to boost EBITDA going forward
  • All kilns in Nigeria are now running on Nigerian sourced gas and coal
  • Own-mined coal accounts for up to 90% of coal used by the group in Nigeria. The balance is obtained from 3rd party companies as a strategy to ensure security of fuel supply
  • The group is in the process of commissioning a 2.5Mts/yr plant in Niger Republic – 2020. The investment (external sources say will cost the group USD250 million) is strategic, (1) as it is planned to reduce the burden of exporting from Nigeria – management said most of the group’s export from Nigeria is currently to Niger, and (2) upon completion, will serve neighbouring Chad, Burkina Faso, and Mali.
  • Update on Tanzania – (1) plant will become gas-fired from early November, (2) connection to gas plant should reduce per tonne cost by USD25, and (3) 300k tonnes (from average 200k tonnes in Q2 and Q3) output is achievable once plant starts running sustainably on gas
  • Sales volume in Cameroon in Q3 (-17% y/y and q/q) was affected by a 4-week unplanned shutdown in production which has now been resolved
  • Group is adopting “regional pricing strategy” to protect market share in Nigeria, and is also flexible on pricing in some outside Nigeria markets (e.g. Zambia, Senegal, Congo q/q) in support of volume
  • Nigeria export sales are about 200k tonnes per quarter. This year we will do approx. 800k tonnes versus 700k tonnes last year
  • Heavy rain and flooding affected key markets in Nigeria in September. So far, October is -2% vs October 17. According to management, “but when we’ve had flooding before, we usually see a strong bounce a couple of months later”
  • The total cement market grew by 9.6% in 9M 2018 and 9.7% in Q3 2018
  • What you need to know about of the newly launched BlockMaster cement: (1) a premium product, (2) high quality (preferred by block makers), (3) high compressive strength (preferred by construction heavy-duty companies, and (4) product has been well-accepted – competition is some way behind the initiative


Last week, LAFARGE published September 2018 results with a loss of NGN6.47 billion in Q3-18, and NGN10.37 billion loss in nine months. The group is now on course to report a loss before tax for the third year in a row. Management was cautionary about its cement demand growth expectation in Nigeria and South Africa, but noted that the ongoing turnaround programmes across the group will provide some room to improve on both volume – and close the gaps which has existed in recent years with competition – and efficiency going forward.

Below, we highlight the key points of the conference call held on Wednesday:

  • The Nigerian operation suffered price effect in Q3 2018, but positive on volume
  • The softening of the Nigerian economy before elections will continue in Q4 2018 and will impact the cement market as well
  • Total Nigerian cement market expected to grow by 3-6% in Q4 2018
  • USD293m loan restructuring agreement has been signed. Facility is now for 7.5 years with 2 years moratorium on both principal and interest effective from 26th September
  • Expects to save USD25m over the next two years from the moratorium
  • SAP and restructuring – SAP expected to go live in Nigeria by January 2019 and to last somewhat longer in South Africa
  • Exchange rate for calculating payables and liabilities converged from NIFEX (NGN331/USD) to NAFEX (NGN363/USD)
  • Outstanding dollar debt – (1) USD293m hedged at NGN365 and USD20m at NGN361, both for 12 months
  • Ghana – (1) started selling in the market ahead of the grinding facility commissioning by moving bagged cement from Nigeria a few months ago (2) all dispatches from Nigeria to Ghana sold, (3) Ghana strategy is to import clinker and turn into cement, and (4) expect to achieve 80% of the 670k tonnes grinding capacity in 2019
  • South Africa operation delivered the first positive EBITDA since Q2 2017, thanks to 14% q/q increase in cement price and gains from the turnaround activities
  • Management signed an agreement in August/September with Coca-Cola based on plastic bottles to be used in the kiln in substitution of more expensive fuels
  • Selling price expected to be stable in Nigeria in Q4 2018, after erosion in Q3
  • Pressure on selling price in Nigeria is more related to the slowly growing market, than on increasing capacity
  • Volume growth in Nigeria could be in the region of 3-5% in 2019
  • The NGN39 billion local bond maturing end of June 2019 expected to be funded from cashflow

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