Dangote Cement Rises after Shares Repurchase Plan
Top cement producer Dangote Plc’s share was more popular in the equities segment of the Nigerian Exchange, NGX, after the company announced a fresh plan to repurchase its own shares in an effort to further stem volatility on the ticker.
Dangote’s share price appreciated by 10%, beating the Nigerian equity index which surged by 5.4% Last week, the cement company told the Nigerian Exchange and investing public it seeks to buy back 10% of its shares. The share buyback scheme has been ongoing but this is coming at a time when Dangote Cement’s profit plunged by 23%.
The company will require more than N400 billion to achieve a 10% share buyback. Already, Dangote Industries Limited own some 90% of 17.04 billion outstanding shares, now as part of a larger scheme, seeks to take back an additional cut.
There is an indication that Africa’s largest cement company plans a fresh listing on London Stock Exchange for strong market repositioning, Dangote Cement’s efforts are to obtain a right price for a London Stock Exchange listing, investment bankers who spoke with MarketForces Africa in confidence said in chorus.
After the successful 10% share buyback, the ticker rose sharply to N300 before it retraces to as low as N230 while giving up its number one market valuation to telecom company Airtel Africa plc.
Weak naira and claims that the local bourse has persistently failed to reward performers after strong earnings releases. Many a time, stocks rarely move even with large earnings bags.
The second most valuable brand on the Nigerian Exchange, Dangote Cement Plc, is now valued at N4.469 trillion at a share price of N262.30 kobo, the ticker had printed at N300 in the year.
The company and Kogi State Government are at loggerheads over one of its largest plants, Obajana Cement. Non-controlling interest in the cement company has a lower influence on stock market direction.
In its interim financial statement for 9 months, Dangote Cement’s profit dropped by a double-digit high on the back of African currencies weakness, rising from changing market dynamics.
Its key market, including Nigeria, have seen their respective local currencies weakened as frontier markets raise the interest rate to fight worsening inflation. And debt load pressures have filtered into African market ratings, thus impacting money and bond pricing.
With operations in most African markets, the falling currencies affect earnings, worsened by rising energy costs worldwide. In its interim result, the cement company’s revenue increased by 15.17% to ₦1.18 trillion in 9 months of the financial year 2022 from ₦1.02 trillion in the comparable period in September 2021.
Rather than volume growth, the surge was driven mainly by price increases in various countries. A review of the financial statement showed that production volume across Africa declined by 6.16% to 20.80 million tonnes in 9M-2022 from 22.16 million tonnes i2-month ago.
This slowdown was driven by energy supply disruptions, supply chain challenges and maintenance activities, according to PAC Capital. In the period, analysts said Dangote cement manufacturing costs increased 19.94% to ₦483.83 billion from ₦403.39 billion, despite the reduction in cement volumes during the period.
The company’s selling, distribution and administrative expenses increased by 41.96% to ₦263.28 billion versus ₦185.46 billion year on year as inflation and foreign currency conversion worsened. READ: Dangote Cement Plans 10% Share Repurchase
MarketForces Africa reported that the cement company has gone into a borrowing mode, a level rarely seen amidst tight financing. The large borrowings lifted its leverage position as its debt financing to equity ratio increased significantly in the current year.
The net finance cost of the Group increased significantly by 180.51% to ₦97.72 billion in 9 months of the financial year 2022 from₦34.84 billion a year ago – due to currencies depreciation, especially CFA and Ghana Cedi.
This resulted in an increased foreign exchange loss. Then, its profit before tax fell by 17.16% to ₦335.90 billion, from ₦405.49 billion in 9M-2021. Despite the lower tax provision, the net profit fell by 23.41% to ₦213.10 billion from ₦278.25 billion, resulting in 12-month trailing earnings per share of ₦17.56, PAC Capital said in its equity report. #Dangote Cement Rises after Shares Repurchase Plan
