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BusinessDay 16 Apr 2018

Monday

Monday 16 April 2018 34 BUSINESS DAY

Monday 16 April 2018 C002D5556 BUSINESS DAY 35 Stocks Currencies Commodities Rates + Bonds Economics Funds Week Ahead Watchlist P.E Yield curve flattens on Fiscal and monetary policy synchronisation FSDH sees Nigeria inflation slowing for fourteen successive months to 13.49% Page 36 Page 36 ECONOMY Dangote Cement, CCNN beat industry average as Lafarge gets red flag BALA AUGIE Dangote Cement, CCNN beat industry average as Lafarge gets red flag BALA AUGIE percent, according to data compiled by BusinessDay. However, Lafarge Africa’s 16.16 gross margins were below the above average as the company continues to grapple with rising cost of production brought on by spiraling variable costs and costs incurred on evacuation at UNICEM. Dangote Cement and CCNN have a better energy mix as they were able to develop coal fire plant. That explains why they have spent less in producing each unit of product. While Dangote Cement and CCNN’s net margin of 25.35 percent and 16.45 percent were above the industry average of 10.08 percent, Lafarge’s huge loss of 34.01 billion validates its negative retained earnings of 11.45 percent. Lafarge is highly indebted or highly geared as its debt to equity ratio of 163.25 percent is the highest in the industry. Lafarge (WAPCO) Plc had a Year-To-Date (YTD) return at the negative trajectory at -0.87 percent. This is way below the NSE ASI of 7.02 percent as market close for the week, Friday, April 13, 2018. Dangote Cement Plc gained 13.04 percent on YTD return basis, 6.02 percentage point higher than the NSE ASI of 7.02 percent. CCNN Plc was the best performing stock with the highest return YTD on the Nigerian Stock Exchange (NSE). It has gained 105.43per cent alone so far this year. CCNN The Cement Company of Northern Nigeria (CCNN) Plc’s profit after tax stood at N3.22 billion as at December 2017, representing a 106.50 percent surge from the N1.56 billion recorded five years ago. Revenue followed the same growth trajectory, hitting N19.58 billion in December 2017. This represented a 29.83 percent increase from the N15.31 billion recorded in December 2013. The company’s shares have gained 71.31 percent since January 2, 2015, to close at N17.80 at close of trading day on Wednesday April 6, 2018. The relative peace in the northern part of the country and low competition where the company supplies cement were major drivers of utilisation rates for the company. The cement maker is efficient in deploying shareholders’ resources in generating higher profit as net profit margins hit 16.25 percent in the period under review, a 0.60 point increase from 10.23 percent recorded five years ago. Lafarge Lafarge Africa Plc is grappling with spiralling cost of production as rising interest on borrowing wiped out all of earnings, leaving the cement maker in a loss position. For the year ended December 2017, Lafarge Africa posted a loss after tax of N34.60 billon from a profit position of N16.89 billion the previous year, the worst results in five years since BusinessDay started compiling data. A N43.02 billion finance costs or interest expense in the income statement in the period under review swallowed all of operating profit of N7.88 billion, which inevitably resulted in the loss. It is glaring that Lafarge Africa is exposed to financial risk as its debt pile has resulted in increased interest payment hence suppressing bottom line (profit). Consequently, risk of stockholders return is increased. Times interest coverage is 0.18 times operating profit in the period under review, which means the cement maker’s ability to meet interest expenses are questionable. Dangote Cement A breakdown of the combined profit in the period under review showed Dangote Cement Plc, the largest producer of the building material recorded a net income of N204.24 billion, from N159.50 billion recorded in 2013. The largest producer of the building material in Africa’s largest economy has utilized each unit of sales in generating higher profit as margins improved. This means it is efficient amid a tough and unpredictable macroeconomic environment. Earnings before interest and tax (EBIT) margin increased to 37.76 percent in December 2017 as against 29.66 percent as at December 2016. Gross profit margins moved to 56.39 percent in the period under review as against 47.35 percent the previous year. Net margin increased to 25.35 percent in the period under review as against 23.22 percent as at December 2016. Cost of sales ratio fell to 43.66 percent in the period under review from 52.64 percent the previous year as the company switched to coal, a cheap source of energy to power plant at the factory. Dangote Cement’s sales grew by 30.96 percent to N805.58 Continues on page 36 SHORT TAKES 25 kobo Nigerian Aviation Handling proposes final dividend of 25 kobo per ordinary share for period ended December 31, 2017. 34 percent Nigeria’s state oil company NNPC’s engineering subsidiary on Friday reported a 34 percent fall in 2017 profit before tax to N3.26 billion ($10.4 million) compared with the previous year. Foreign exchange gains of 56 percent before tax in 2016 fell to 4.8 percent in 2017, NNPC spokesman Ndu Ughamadu said in a statement. N237.8 MILLION Guinea Insurance posts rise in full year December 2017 profit before taxation of N237.8 million versus N176.2 million a year ago. It recorded full year net premium income of N747 million naira versus N649.5 million a year ago BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: DIPO OLADEHINDE, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: DAVID OGAR ) BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Email the BMI team patrick.atuanya@businessdayonline.com

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