Dangote Cement which operates in Nigeria and 14 other African countries released less than stellar FY 2016 results last week.
Digging through the numbers what struck us once again atMyBankrate.ng was the poor returns the group is getting from its African operations ex – Nigeria, which continue to make losses.
While Nigeria reported profit after taxes of N379.3 billion, the Pan African operations once again reported a second consecutive year of losses totalling N38.5 billion following the N23.5 billion loss recorded in 2015 (see chart).
From the numbers we can see that the losses are mounting for African operations as a result of razor thin EBITDA margins compared to Nigerian operations.
EBITDA margin is a measurement of a company’s operating profitability as a percentage of its total revenue.
For Nigerian operations EBITDA margins came in at a hefty 56.7 %, while the rest of Africa operations had EBITDA margins of 13.5 %.
Dangote Cement stock peaked at N250 per share in mid-2014 (see chart).
It is difficult to see where the upside will come from for Dangote Cements share price with African operations that continue to be a drag on the company.
We believe based on these numbers DANGCEMs stocks fair value may be much lower!
