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Dangote Cement Profit Margins Improve Despite Covid-19 Headwinds

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Dangote Cement, the largest producer of the building material in Africa’s largest economy said profit margins expanded even amid the coronavirus pandemic that slowed construction activities as its Pan African operations continued to thrive.

For instance, the company has translated each Naira in revenue it collected into higher profit as net profit margins increased to 37.81 percent in September 2020 from 34.51 percent the previous year.

Net income followed the same growth trajectory as it spiked by 35.20 percent to N208.68 billion from N154.35 billion as at September 2019.

Revenue was up 12.011 percent to N761.44 billion as at September 2020, while cement production and bagging capacity stood at 48.55 million metric tons.

A breakdown of top line figures shows revenue from Nigeria’s operations was up 14.45 percent to N535.50 billion in the period under review while Pan African business saw revenue spike by 9.09 percent to N232.60 billion the previous year.

The coronavirus pandemic paralyzed construction activities across the country as sites were shuttered, leaving the economy at the brink of another recession.

Nigeria’s economy contracted 6.1 percent in the second quarter as the combined impact of the prolonged lockdown to curb the spread of the coronavirus and the plunge in the price of oil, the country’s main export, took its toll.

GDP may contract 4.3 percent this year, the International Monetary Fund said on Oct. 13. Protests over police brutality last month may also weigh on growth.

Despite these challenges, Dangote Cement’s operating profit or earnings before interest and tax (EBIT) increased by 24.38 percent to N287.92 billion as at September 2020 as against N231.48 billion the previous year.

Analysts say the gradual reopening of the economy after months of lockdown and speedy implementation of the budget will help add impetus to construction activities.

“Optimistic about Nigeria’s cement industry as we believe that the Economic Sustainability Plan (ESP), if implemented within the time frame stipulated, could raise some hope for the cement industry,” said analysts at United Capital in a recent note to clients.

“This is as the FG have committed to renewing commitment towards the construction and maintenance of federal highways, roads, bridges, and road interventions within federal tertiary institutions across the country,” said the analysts.

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