Dangote Cement Plc (DANGCEM) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Dangote Cement Half Year 2026 Investor Call. [Operator Instructions] Please note that this event is being recorded. I will now hand the conference over to Michael Ani. Please go ahead, sir.

Good afternoon. Welcome to today's call. My name is Michael Ani, Investor Relations, Dangote Cement. As you are aware, Dangote Cement recently released its half year 2026 financial results. On this call, we have our key management executives who are going to be providing the facts behind the figures of these results. Leading this conversation is our Group Managing Director, Mr. Arvind Pathak, who will be supported by our Group Chief Financial Officer, Dr. Gbenga Fapohunda. Before I invite the GMD for his opening remarks, I just want to say for those dialing via the HD phone, please ensure you are audible while those using the webcast just ensure that your questions are readable. Our key management executives are here present to take all questions. Dear GMD, I welcome you. Please, you have the floor.

Thank you, Michael. Good afternoon, everyone. And once again, thank you to all of you for taking this time to join us today. It's my pleasure to welcome you to this conference call to discuss Dangote Cement's H1 2026 financial results. As most of you would be aware that Dangote Cement Plc is Sub-Saharan Africa's largest cement producer with operations in 11 countries spread across the continent as highlighted on Page 2 of our presentation. Our installed production capacity currently stands at 55 MTA following the commissioning of our 3 MTA grinding plant in Cote d'Ivoire in Q3 2025. The increased capacity further reinforces Dangote Cement's position as Africa's leading cement producer while creating additional opportunities to create -- to capture future demand and drive long-term shareholder value. On the capital markets front, Dangote Cement remains the most capitalized industrial goods company on the Nigerian Exchange Group, NGX, with a market capitalization of NGN 17.3 trillion based on the published data as of 31st July 2026. On Page 3, the International Monetary Fund projected regional growth to moderate slightly from 4.5% in 2025 to 4.3% in 2026, reflecting a more challenging global environment. Escalating geopolitical tensions, particularly in Middle East, have disrupted supply chains and driven a sharp rise in oil prices weighing on overall economic activity. On the same page, we also present a snapshot of Nigeria's macroeconomic landscape with key indicators pointing in the positive elevated inflation environment. The uptick in inflation was driven mainly by higher fuel prices linked to global oil market disruptions following the Middle East conflict. The resulting increase in fuel costs pushed up the transport and logistic expenses, further weighing on household purchasing power. The Central Bank of Nigeria adopted a more cautious stance in the second quarter, retaining the benchmark interest at 26.5% after initial cut in the first quarter to support liquidity and economic activity. Moving to Pages 4 and 5, we present an overview of the group's financial and operational performance for H1 2026. From a financial standpoint, the group delivered strong results -- strong set of results. Revenue grew by 21.4% to NGN 2.5 trillion, driven by robust contributions from both Nigeria and Pan-Africa where revenues increased by 25.3% -- 25.2% and 13.7%, respectively. Profitability also strengthened with group EBITDA rising 25.8% to NGN 1.2 trillion and EBITDA margin improving to 47.3%. This performance underscores the effectiveness of our cost management initiatives, particularly in Nigeria, where EBITDA margin expanded from 58.6% to 60.1 percentage. Consequently, profit after tax grew by a strong 22.7% to NGN 638.5 billion. Operationally, group volumes rebounded by 11.8% to 14.9 million tonnes, supported by improved sales across most of our markets despite prevailing headwinds. Export volumes from Nigeria increased significantly by 62.3%. Turning on to Page #6. We present a detailed overview of the group's financial position, cash flow performance and leverage metrics. In H1 2026, the group generated strong net cash flow from operations of NGN 1.1 trillion, while capital expenditures stood at NGN 354.2 billion, reflecting continued investment in expansion projects and operational efficiency initiatives. We also made significant progress in strengthening our balance sheet, transitioning from a net debt position of NGN 682.9 billion to a net cash balance of NGN 215.2 billion at the end of June 2026. This reflects robust cash generation, continued focus on maintaining a strong liquidity position while strengthening -- while further strengthening our balance sheet and financial flexibility. Coming to Page 7, we provide a detailed overview of our debt profile and liquidity position, including a time line of our key activities in the debt capital market with particular emphasis on our bond issuances and commercial paper program. We also highlight the strong credit ratings of Dangote Cement across multiple rating agencies, reflecting the solid fundamentals of the business and our robust capacity to meet short-term funding obligations. A key highlight across Pages 8 to 11 is the introduction of Dangote Cement decarbonization road map, which sets a clear target to reduce Scope 1 and Scope 2 CO2 emissions by 20% by 2030. As I conclude, let me turn to the business outlook, which is covered in Page 13 and 14 of the presentation. Dangote Cement operates within the broader framework of the Dangote Group's Vision 2030, an ambitious plan to achieve $100 billion in revenue by the end of the decade and to position the group among the world's top 100 companies. This vision reflects a clear ambition to demonstrate that Africa can build, produce and compete on a global scale. As one of the group's largest and the most profitable businesses, Dangote Cement plays a central role in delivering this vision. Our planned expansion to about 80 MTA capacity driven by continued investment in high-growth markets will significantly enhance our contribution to group earnings. This growth will generate substantial foreign exchange through exports and reinforce our track record of operational excellence across multiple African markets, supported by a stronger focus on customer-centric service delivery. In closing remarks, I would like to sincerely thank every one of you who joined us today. To our investors, your continued trust and support remain critical to our success. With a strong first half performance -- of the year, we are confident in delivering an even stronger performance in the periods ahead. Thank you.

[Operator Instructions] At this stage, there seems to be no questions on the conference. I will hand over to Michael for any questions on the webcast. Michael?

Okay. Thank you, Danielle. I think the first question is from Patrick [ Atuanya ] and it reads, over 90% of Dangote Cement's operating profit is still gotten from Nigeria as at half year 2026. Has there been a misallocation of capital in investments made by the firm in its African operation? Would shareholders have been better served if those funds were returned to them. And the last one, he says, is this poor ROI for Africa depressing the valuation of Dangote Cement? I take that first question.

Okay. Mr. Patrick, you are right. A large portion of our profit is coming from DCP Nigeria. But then if you just go back 2 years back or 3 years back when we had the massive currency correction. And at that time, the proportion of Pan-Africa was significantly higher from where we stand. So this is one advantage of the DCP's assets and is a natural hedging in some way against the foreign exchange fluctuations, et cetera, wherein if one market doesn't do well, there -- all probability that the other market will pull it up. So we are very judicious and some of the investments are always blended, not just looking at the current but also futuristic eye in the mind. And also the opportunities which exist across the various countries. So yes, we are mindful of our current strong position in Nigeria, where we have the profit coming from, but we also look ahead for the interest of our shareholders. So we are very focused on Africa, and we feel that the next growth center across all the market growth, a long way to go, and we are very well placed to capture that value. Thank you very much.

Okay. In addition to what the GMD has said, 2 things as well. The investment in Pan-Africa, so many countries have been fully paid in terms of [indiscernible] a lot of the investments we've had in Pan-Africa. The second part is in terms of recouping of dividend as well. Last year, we were able to recover about $150 million. And during the time when dollar was scarce, this $150 million, $100 million are coming annually have been very helpful in terms of addressing FX liquidity challenges, just to add to what GMD has said.

So the next question also from Patrick [ Atuanya ], which reads that why is Dangote Cement spending so much money to expand capacity with capacity utilization around 61% for current plant?

Okay. Gbenga, let me step into this. The difference between some of the cement companies, I would not like to name them, of the other continents, let's say, which are sort of developed countries. Basically, you're looking at them, which is having a very lower end single percentage growth, maybe 2%, 3%. And the size of the market and each of the country itself, except for barring a few. I'm not referring to India and China, there could be a different ballgame, are very small. So at one point of time, most of the operation capacities would have been existing for quite some time, and it takes them around 5 years to erect a new capacity. So that's why you see they would have matured and utilized. Unlike that, in India, China and now Africa is on the threshold of going into that hockey stick performance. There will always be a front ending of CapEx because we expect the growth to be much higher and which we have seen evidently -- so keeping that in mind, you will always find while the plant is in the initial stages, the capacity utilization will be low. And the second part of the factor you should also keep in mind, Africa is a large mass. And some of the cement because of so many countries, the cross-border movement may not be easy or within a country like Nigeria also is a big country. So you cannot take cement from north to south or south to, let's say, West, et cetera. So to be able to capture the growth of each of the regions, you have to position your plants in such a way. And when you position it, there are certain minimum size of plant that you put, it will take time to grow to that level. Third thing is in some of our countries, which are emerging markets, the fluctuations because the usage of cement is not mature to the industrial products like roads, bridges, infrastructure, which are ready mix, there are still hand mix concrete, et cetera. In that case, the difference between the peak period and the lower, which is the slightly dull period is quite huge. And if you have to service the customer the -- during the peak period as well as you have been doing in the lean period, the margin that you will keep in your capacity is much higher than what you see in the developed countries. If you add up all this, I think we are in a very sweet spot to capture any good opportunity. And our financial numbers, what you saw in Q1 or what you are seeing in Q2 is justifying the action that we have taken and the investment that we have done.

Thank you, GMD. The next question is from [indiscernible] and it reads, it says, how is the Itori plant expansion being funded? What is the time line for completion? What were the factors behind the choice of that plant to be expanded? I think we should just take that question before I move to the next one.

Okay. Let me just answer some part of it. On funding part, I'll request my colleague, Mr. Gbenga to chip it in. See during this period when we have this currency fluctuation, we [indiscernible] our strategy. And one of the central piece of our [indiscernible] strategy for the DCP was that we wanted to achieve a status Initially, we thought it would be great to achieve something which is called that ForEx neutrization. That means I meet my requirement of forex through my own generation. And whole lot of activities took under that. But as we progress on that part and we started seeing success, and we started realizing that we are almost very close to achieving ForEx neutralization. Then we embarked upon a journey that we should be surplus. And just to give you some numbers, we were taking from the market some $20 million, $22 million per month. Now we are almost generating a surplus of around $4 million to $5 million every month to meet our operational requirements. In this exercise, one of the central pieces played an important role and which -- if you have heard me and seen the numbers in the presentation is the growth story in export. We feel that when we went more deeper and deeper that we are the best operational company in Africa to be able to latch on and to benefit from the export market. We have the necessary infrastructure. We have the customers, we have the reach, we have the cost structure which would make it most effective to fill up the gap of around 20 million, 22 million tonnes of cement, which is imported into the southern part of Africa. And that is where our journey began and we started doing from our existing operations. As we are seeing, in that increased export, we don't want to be at the cost of the domestic export. So Itori is a totally 100% export-oriented unit. It comes with various desired initial benefits, and is going well. It has progressed well, and we expect it to be completed by the end of this year. And as far as funding, this is our normal funding Gbenga will tell you more. We have a mixture of supplier funding and our own funds and exact numbers and details, maybe Mr. Gbenga will share with you.

Yes, you are very correct, spot on. 2 main sources of funding the plant, which has been our business model for a long time, operating cash flow and supplier credits. Thank you.

Thank you, for those response. The next question is from [indiscernible] and it reads. Can you please provide an update on the proposed listing in London?

Okay. Thank you. The only update we can provide on that is that the approval of the Board has been gotten. We would -- as things unfold, we would inform the market. Thank you.

Thank you, sir. The next is from Abeeblahi Rufai, and it reads -- Abeeblahi Rufai from CardinalStone Securities, we saw haulage costs rise significantly in Q2 by 42%. Given the company's CNG rollout, how was the rise still that high, particularly given that production energy cost wasn't negatively impacted.

Okay. Thank you, Abeeblahi let me take the first shot. Okay. I'll take this question from 3 perspectives. So you saw there was an increase in haulage costs, mainly driven by 3 factors. The first one is volume increased by about 8% to 10% in Nigeria. Group-wide, it actually increased by about 12%. So if volume increases, haulage, which is technically transportation cost will go up in that quantum. That's the first leg. The second leg is, you mentioned 42% increase. AGO actually increased by about 70% increase. So huge impact from the savings from CNG actually reduced this cost. And the third part is the fact that not all our trucks are actually on CNG for now. But by next year, the road map is actually for over 98% of our trucks to be on full CNG. So it's a road map. We are almost there. Everything is on track, and we would -- we hope to get there without any glitch. Thank you. GMD, any addition to that, sir?

Just one more keep in mind that we are doing exports. So export to the -- to some of these countries, when we export, do not have a CNG facility. They are in AGO-driven trucks. Altogether, which has this impact, but this is only because of this international increase in oil prices. And since our fuel that we use in our process is not AGO, it did not affect us to that extent.

Thank you, sir. So the next question from Abhi is also on London listing, but he is actually asking, is it a primary listing and would it result in cash inflows to fund the expansion?

Okay. Basically, it is a secondary listing. It is not going to lead to cash flow injection...

He also asked a follow-up question, and he said, what significantly changed in the Pan-African segment between Q1 and Q2? -- this segment swung from a loss of NGN 10 billion loss to NGN 13 billion profit. How much of it is FX impact? How much of it is FX impact or genuine improvement in operation?

A chunk of it is genuine improvement in operations. I will allow the GMD to actually throw more light on that. Go ahead, sir.

Okay. I think Dr. Ben rightly captured it. we had a change in some of our strategies in the various countries. And after some not so good performance results in Q1 and mainly especially coming from Senegal, Ethiopia, which are our key performers in the earlier years, we rejig our again, thinking process, and they bounced back in the quarter 2. So primarily cement substance could be and all around most of the countries had an improved performance in Q2 as compared to Q1. So it's entirely because of operational performance.

Thank you very much, sir. The next question is also from Rai and it reads, what is the outlook on cement pricing in the second half of 2026...

Let me take this question. See we have always mentioned and I think in the previous calls also, price is a function of multiple factors. And most predominantly, it is on account of supply/demand. Then comes the question of affordability, the purchasing power, the country's economic macro condition, et cetera. Some of these countries -- some of these influences cannot be impacted by the company's desire or the wish. Every company would like to have as high price possible. So we really don't look at what should be our prices in the quarter. We focus more on our operational, logistic, meeting the customer needs, becoming the choice of the customer, where getting the brand equity, generating export, et cetera, et cetera. However, in general, we look for can we have an overall basis for an organization, at least the dollar parity. But that has got -- we do the efforts in that direction, primarily more of the external factors will go in the price. So at this stage, we don't see any difference coming in the subsequent quarters.

Thank you very much, sir. The next question is from Tim Wilson and it reads good day, and congratulations on your results. Is it plant 12 million tonnes expansion included within the group's 80 million tonnes capacity target? Or is it in addition to that target? The next it reads -- Okay, I think we should take that first before I move to the other.

The short answer is this 12 million ton is a part of 80 million tonnes. So when we talk about 55 million, it is the capacity which is operating today. Any project that we are working on, which enhances the capacity is a part of the 8 million and which includes this 12 MTPA...

Thank you, sir. So the next question is also around Iti and it reads, what is the strategic rationale for the planned capacity expansion in Ituri? Given Nigeria's existing, what is the investment case for an additional 12 million tonnes and the cyca $800 million capital commitment? Is the expansion primarily driven by tax incentives and the similar incentives exist across all of your Pan-African markets?

I wouldn't say it's purely a financial incentive as such. It is applied for all the exports which happen out of Nigeria. That is the earnings out of them do not attract is not primarily driven by that. It's driven by, as I earlier said in my -- one of the answers. It derives from our ForEx neutralization strategy, the results, the outcomes are very encouraging. And now we see that by this year, we should be in a position to be able to, let's say, export somewhere around 4 million tonnes or, let's say, 4 million to 5 million anywhere in between that of the quantity out of the country. And a plant to be erected, it takes at least 2 to 2.5 or let's say, 3 years to stabilize, et cetera. And by 2030, our vision is to have 8 million to 10 million tonnes of export. So if the export demand to be met, this additional capacity capability has to be built into the export-oriented plant. And the other plant, whatever surplus capacity or excess capacity we have will be taken care by the growth in the market, which happens every year.

Thank you, sir. And the next question reads, for the market you are expanding into, are there any tax holidays or incentives that could support earnings?

Each market in the Pan Africa has got a different sets of -- I would not say incentives, the promotional where we try to attract the investment in the country. Each one has a different mode of promoting putting capacity because putting cement plant has a lot of employment, opportunity, ancillary development, localization, et cetera, et cetera. So I would not be able to share what is there in each of our expansions. Individual countries will have its own incentive scheme, which are there on the website and is applicable to all, not only to our group.

Thank you, sir. So the next question reads, with the entrance of HBM into the market, how has the competitive environment shift in Nigeria?