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Dangote Cement, Nigeria’ largest listed firm has seen its shares more than double in the first month of 2024. The largest cement company in Africa now has a market capitalization of N11.82 trillion ($13.4 billion), after rallying by 116.97%, in 2024.
Some of the reasons for the rally are outlined below after MoneyCentral talked to market sources.
Dangote Refinery cash needs
There is a school of thought that the valuation of Dangote Cement was initially affected by the uncertainty around the prospect of Dangote Refinery, with concerns that if the Refinery does not work or needs significant capital injection, Dangote Group may have to seek cash from its existing business, in whatever form or shape, especially Dangote Cement, which is the largest entity within the Group.
Dangote Refinery completion
However, with the recent commencement of operation of Dangote Refinery, analysts believe that this would free up cash for Dangote Cement and provides some synergy within the group, especially in areas of fuel cost, which may slightly improve Dangote Cement’s margin and its ability to further outcompete and outgrow peers.
The refinery project is a future cash cow for Dangote Industries Limited (DIL), and once operational, Fitch expects the project to contribute around $1 billion to EBITDA annually when ramped up from 2024.
Potential deal with foreign investors
There is also the speculation that Dangote Cement may attract new investments from foreign investors, including the Saudi Arabian government, who may at some point show interest in investing in Dangote Refinery (which may need to deleverage by raising equity to pay down some of its debt). Market sources tell MoneyCentral that any such investor may also like to invest in sister businesses like Dangote Cement, especially as it is one of the few Nigerian companies that can absorb sizable capital inflows.
The Otedola factor
Nigerian Billionaire Femi Otedola, a distinguished entrepreneur and investor, recently announced a significant acquisition of shares in Dangote Cement, the only cement company in Nigeria with two export terminals, with a combined export capacity of 8 million tons per annum.
The strategic investment underscores Otedola’s confidence in Dangote Cement’s potential to generate foreign exchange for the country and his dedication to supporting businesses that contribute to Nigeria’s economic resilience.
As Sub-Saharan Africa’s largest cement producer, Dangote Cement boasts an annual production capacity of 51.6 million tons across ten countries.
“Dangote Cement’s unique position with two export terminals offers a substantial opportunity to earn foreign exchange, crucial for Nigeria’s economy. This, along with the company’s Pan-African presence, makes it an ideal investment choice,” said Otedola.
Market sources tell MoneyCentral that Otedola, who everyone knows is close to Alhaji Aliko Dangote, must be on to something to be so bullish in staking his capital into Dangote Cement, so some investors just want to follow his lead.
“You cant ignore a smart money investor like Mr. Femi Otedola when he makes billion naira moves, given his stellar track record in recent times with Geregu, Transcorp and First Bank,” a market source told MoneyCentral.
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