Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dangote Cement PLC (NSA:DCP, Financial) reported a significant increase in group revenue by 85.1% to NGN1,760.1 billion.
- Group EBITDA saw a double-digit growth of 50.3% to NGN666.2 billion.
- The company paid NGN502.6 billion in dividends, reflecting a 50% increase in dividend per share.
- Nigerian volumes experienced a double-digit growth of 10.9%, supported by resumed construction projects and enhanced operational efficiency.
- The company is focusing on sustainability, with a thermal substitution rate increasing to 10.5% and significant advancements in alternative fuel initiatives.
Negative Points
- Currency devaluation remains a key challenge, with the Nigerian naira depreciating by 65.2% against the dollar.
- Inflation continued to rise, reaching 34.2% in June, impacting borrowing costs.
- Net debt increased by NGN394.4 billion to NGN915.7 billion, with a net gearing of 42%.
- The macroeconomic environment in Sub-Saharan Africa remains uncertain due to recent elections in Senegal and South Africa.
- High interest rates in Nigeria have increased the cost of borrowing, although Dangote Cement PLC (NSA:DCP) has mitigated this with long-term bonds.
Q & A Highlights
Q: How many CNG trucks does Dangote Cement have? And what difference is their usage making in your operations? Is there a plan to phase out diesel-powered trucks? Are you not concerned that gas shortages in the country may affect CNG supply?
A: (Arvind Pathak, CEO) We have approximately 1,400 trucks of the older dual-fired engine type and are procuring 1,500 new CNG trucks. We plan to phase out diesel-powered trucks. We have balanced our fuel requirements and do not foresee gas shortages as a challenge.
Q: What is the business energy cost for the period? And what does its outlook look like for the rest of the year? What energy mix is the business exploring for its operations?
A: (Unidentified) We expect stability or reduction in energy costs as we increase the usage of alternative fuels, CNG, and local coal. Our plants can use gas, coal, alternative fuels, and LPFO, and we will always use the cheapest combination.
Q: You mentioned that Nigerian volumes grew by 10.9%. What did the market grow by? And what are you seeing in terms of competitive dynamics in the market?
A: (Arvind Pathak, CEO) We have no mechanism to monitor national growth demand or de-growth. We believe we have either kept pace with or exceeded market growth.
Q: What are the plans for lower impact liabilities or obtaining tax incentives? What is the component of the FX loss reported? And what efforts are being made to reduce it? What is the volume expectation for the end of the year?
A: (Unidentified) We plan to reduce tax through more exports, which are tax-exempt. FX losses are due to devaluation on FX-based loans for working capital. We are trying to pay off these obligations and increase exports to get more FX. Volume expectations depend on weather conditions, but we expect to do better in H2.
Q: What is the company's effective interest rate in the high-interest rate environment? Has that increased? Who do you see as a competitor on a global scale?
A: (Unidentified) Our interest rates have increased but not as much as other companies due to long-term bonds locked in at 12-13%. Our strong cash flow minimizes borrowing. (Arvind Pathak, CEO) Our main competitors in Africa are multinationals like Lafarge and Heidelberg.
Q: Is Pet coke a possible further source of fuel with a major oil refinery opening in Nigeria?
A: (Arvind Pathak, CEO) We do not plan to use Pet coke as it is not environmentally friendly and does not align with our sustainability program. To my knowledge, the refinery will not produce Pet coke as a byproduct.
Q: I saw an increase in PPE and there was a NGN 1 billion FX effect. Please, I need more clarity on that.
A: (Unidentified) The increase in PPE is due to FX translation effects and additions. When assets are acquired in a foreign country, they are translated to the reporting currency, resulting in a gain if the naira has devalued.
Q: What is your outlook on cement prices for the second half of the year?
A: (Arvind Pathak, CEO) Prices depend on market conditions and are not in our control. We focus on internal efficiencies and sustainability initiatives like exports, alternative fuels, and CNG to manage costs.
Q: What are the plans for CapEx and borrowing for the remainder of the year?
A: (Unidentified) We plan to grow the business with investments in the 6MTPA plant at Itori, the Ivory Coast plant, CNG trucks, and alternative fuel systems to reduce our carbon footprint.
Q: What is the update on the Itori plant in Ogun State?
A: (Arvind Pathak, CEO) The performance in Q3 will depend on the rains, but we expect to do better in H2 than in H1.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
