Dangote Cement Plc, the largest producer of the building materials in Africa’s largest economy is good at generating profit from its capital which means the company is suitable to invest in.
The most capitalised firm in Nigeria has a return on capital employed (ROCE) of 54.10 percent in June 2021, according to MoneyCentral calculations.
To put in better context, a ROCE of 54.10 percent means for every Naira invested in capital, the cement maker generated N0.54 in operating income.
It is noteworthy that peer rivals are playing catch up as BUA Cement and Lafarge Africa recorded ROCE of 5.23 percent and 10.27 percent respectively.
Investors want to know whether a company is efficient in the use of their resources to magnify earnings, and Dangote Cement has been benefiting from the country’s infrastructure deficits and rebound construction activities following the relaxation of social distancing rules by the government.
Return on capital employed (ROCE) is a financial ratio that can be used to assess a company’s profitability and capital efficiency. In other words, this ratio can help to understand how well a company is generating profits from its capital as it is put to use.
Analysts say Dangote Cement’s exposure to the East and West Africa market ahead of competition in Nigeria.
And little wonder it has been making more profit from core operations than peer rivals.
It has earnings before interest taxation depreciation and Amortization (EBITDA) margins of 36.80 percent as at June 2021, and that compares with BUA Cement’s 47.0 percent and Lafarge Africa, 26.40 percent.
Analysts at Chapel Hill Denham expect a rather robust third quarter H2-21 performance and beyond, most likely exceeding Bloomberg’s consensus expectation.
“Our prognosis is hinged on the constructive view of a continued strong cement demand, compelling case for further price adjustments, and DANGCEM’s exceptional portfolio diversification,” said the analysts.