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Sunday, March 26, 2023

Dangote Cement Outperform Peers on, Margins, ROE

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Dangote Cement Plc has outperformed peer rivals in all financial metrics, as it continues to deliver a higher return to shareholders, which is why investment houses have a buy rating on its stock.

A cursory look at the 2021 audited financial statement of the dominant players in the cement industry shows Dangote Cement generated a return on equity (ROE) of 38.88 percent.

And that compares with Lafarge Africa’s ROE of 13.81 percent and BUA Cement’s 23.71 percent.

What this means is that Dangote Cement is good at generating returns on investment it receives.

It retains a larger percentage of Naira of revenue as gross profit as evidenced in gross profit margin of 60.17 percent. And that compares with Lafarge Africa’s gross margin of 48.64 percent and BUA Cement’s 46.66 percent.

It is important to note that Dangote Cement makes more profit from core operations than peer rivals, which validates the focus and market penetration strategies of management and board of directors.

It generates 42.09 percent in operating profit margin, and that compares with Lafarge Africa and BUA Cement’s margins of 22.21 percent and 40.71 percent respectively.

Dangote Cement spends less on input cost to produce each unit of products than peers as it continues to invest in alternative energy mix.

Its cost of sales ratio stood at 39.82 percent as at December 2021. And that compares with Lafarge Africa’s 51.53 percent and BUA Cement’s 53.33 percent. A lower ratio is better.

In the corporate finance parlance, high profit margin reflects corporate strength, and Dangote Cement remains the preference of most investors because its consistent earnings growth helps it deliver robust free cash flow.

This is the right time to buy Dangote Cement stock because the government proposed infrastructure spending and subsidiaries across the continent are expected to add to earnings in 2022.

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