Johannesburg - Dangote Cement, Africa’s largest producer of the building material, said full-year profit rose 15 percent as new plants increased total volumes by 35 percent and a price cut in its home market of Nigeria helped bolster sales and offset the effects of slowing economic growth.
Net income was 185 billion naira ($929 million) in the 12 months through December, compared with 160.6 billion naira a year earlier, the Lagos-based company said in a statement on Tuesday. Revenue increased 26 percent to 492 billion naira. Dangote Cement shares jumped 5 percent to their highest in two weeks at the close of trading.
Dangote Cement, controlled by Africa’s richest man, Aliko Dangote, is seeking to boost sales and protect market share in Nigeria amid slowing economic growth, while rapidly expanding elsewhere in sub-Saharan Africa, where it opened six new factories in the past two years. The company cut prices in Nigeria in September, to boost consumption and compete with imports.
“New factories performed very successfully across Africa, gaining significant market share against long-established incumbents,” CEO Onne van der Weijde said in the statement. “In our home market of Nigeria we increased sales by 3.2 percent against the worst economic crisis the country has faced in many years, which demonstrates that the Nigerian market is very robust.”
Dangote had a positive start to 2016, with a 55 percent increase in volumes during January and February, compared with 2015, according to a company presentation filed on Tuesday.
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The 2015 earnings increase was largely driven by growth outside Nigeria, Lanre Buluro, an equity broker and analyst with Primera Africa Securities, said by phone from Lagos.
“They have done pretty well in those markets, beating our expectations,” Buluro said. “It is a positive surprise.”
Dangote has added new factories in Cameroon, Ethiopia, Senegal, South Africa, Tanzania and Zambia in the past two years and will open a plant in the Republic of Congo later this year. The company last year announced plans to add 25 million metric tons of capacity through investments in sub-Saharan Africa and a new plant in Nepal. It’s projecting an increase in annual capacity to about 77.3 million tons of cement by the end of 2019, compared with 43.6 million tons last year.
In Nigeria, sales volumes rebounded after the September price cut and reached a record for the company in December, Dangote said in the presentation. Cement imports into Nigeria fell off rapidly during the fourth quarter and the company increased its market share to 68 percent in December, compared with 62 percent for the whole of 2015.
Economic growth in Africa’s most populous nation of more than 170 million last year is estimated to have eased to 3 percent, its slowest pace in more than a decade, after oil prices plunged. Dangote has also grappled with a shortage of foreign exchange in the country.
In Nigeria, about 55 percent of the company’s costs are exposed to the dollar, including coal, spare parts, salaries, diesel and gypsum, CFO Brian Egan said on a conference call Tuesday.
“We have a lot of dollar-related costs, but we at the moment still can source the majority through the central bank at the central bank rate so the inflation doesn’t hit us so bad as of now,” van der Weijde said on the same call. A coal mining plant expected to become operational this year is one of “a lot of initiatives” geared toward limiting the company’s costs, he said. The company is also reconverting trucks to be able to run on gas.
The company reduced net debt by 17.8 billion naira to 204.2 billion naira and its directors have recommended a dividend of 8 naira per share.