Dangote Cement Plc Q2/H1 Result– Strong Fundamentals with Caution on Currency Risk

Dangote Cement Plc – Record-Breaking Earnings Amid Strategic Leadership Transition

Dangote Cement Plc delivered record-breaking results for Q2 and H1 2025, reflecting robust volume growth, pricing strength, and operational efficiency. Profit after tax surged 303% YoY in Q2 and 174% in H1, supported by strong EBITDA expansion and export-led growth. With a growing pan-African footprint and upcoming capacity boosts, the company is well-positioned for long-term value creation. The recent leadership transition—while symbolic—underscores a structured succession plan rather than strategic instability.

Strengths

• Explosive Earnings Growth: Q2 PAT rose 303% YoY to ₦311.2bn, with H1 PAT reaching ₦520.5bn (+174%). EPS grew nearly 4x YoY to ₦18.44 in Q2.
• Top-Line Expansion: Revenue climbed to ₦1.08tn in Q2 (+15% YoY) and ₦2.07tn for H1 (+17.7%), driven by increased cement volumes and improved pricing.
• Strong Operating Leverage: Gross profit margin remained strong, rising to ₦630.6bn in Q2 (+24% YoY), supported by cost containment and better energy efficiency.
• High EBITDA Performance: H1 EBITDA grew by 41.8% to ₦944.9bn, with Nigerian operations contributing ₦845.4bn—a sign of strong domestic profitability.
• Export Strategy Paying Off: 18 clinker shipments to Ghana and Cameroon in H1 signal growing traction in regional trade and FX earnings.
• Capacity Expansion: Installed capacity to rise from 52 Mta to 61 Mta by year-end with new plants in Itori (6 Mta) and Côte d’Ivoire (3 Mta).
• Strong Cash and Balance Sheet: ₦301bn in cash and ₦2.22tn in equity buffer the firm against macro shocks.

Weaknesses & Risks

• Leadership Transition Uncertainty: Aliko Dangote’s retirement, while planned, marks the end of an era; market sentiment may watch closely for strategic continuity.
• FX Volatility & Inflation: Continued pressure on energy and import costs could affect margin stability despite cost containment efforts.
• High Finance Costs: Significant finance cost exposure (₦216.2bn in H1) from interest and FX losses remains a drag on net income scalability.
• Concentration Risk: Heavy dependence on Nigerian operations—though highly profitable—leaves exposure to domestic policy or economic shocks.

Opportunities

• Pan-African Market Growth: Expansion in Côte d’Ivoire and increasing exports offer a hedge against Nigerian macro risks.
• Infrastructure Boom: Public infrastructure investments in Nigeria and West Africa could spur sustained cement demand.
• Energy Efficiency & ESG: Shift to alternative fuels and sustainability focus could drive long-term margin expansion and investor interest.

Valuation Outlook

Given the company’s annualized PAT run-rate of over ₦1 trillion and expected EBITDA topping ₦2 trillion by FY25:

• Applying a conservative EV/EBITDA multiple of 9x suggests an enterprise value north of ₦18 trillion, with scope for upside as pan-African earnings deepen.
• We project EPS to surpass ₦36 by FY25. At a target P/E of 16x, fair value per share would be ₦576, implying significant capital appreciation from current levels.

Conclusion

Dangote Cement remains a bellwether for Nigerian equities and a proxy for infrastructure growth across Africa. The Q2 and H1 2025 results demonstrate world-class execution, margin resilience, and strategic clarity. While the chairman transition is noteworthy, the company’s governance structure and operational depth reduce long-term risks.

We reaffirm a STRONG BUY rating with a bullish long-term outlook, bolstered by record profitability, cash generation, and upcoming capacity additions. Investors should watch for updates on the Itori plant commissioning and FX management strategies as key catalysts.