Dangote Cements Its Position As African Giant

On the back of successive impressive financial performance s , Africa's largest cement producer Dangote Cement Plc has attracted an investment of USD289mn from the South African pension fund Public Investment Corporation (PIC) , who now own s a 1.5% stake in the company. This move reflects the positive investor sentiment Dangote has been eliciting since the beginning of 2013, which has seen its stock prices rise 63.9 % to in the year to date (11 June 2013) . Making up over 30% of the Nigerian Al l- Share Index, Dangote's rise has underpinned a rally in the broader Nigerian equity market, informing BMI 's Country Risk team's optimistic view on Nigeria ( see ' Equity Rally Becoming Broader-Based' 10 June).

Giant Dangote's Outperformance Pushes Up All-Share
Dangote Cement and Nigeria All-Share Index, Normalised as of 01 January 2013

This impressive appreciation in share price has seen the company's market capitalisation also increase dramatically. The US $ 289mn investment from the Public Investment Cor poration of South Africa would give the company a market capitalisation of USD19.2bn. This is slightly below the current estimations on Dangote's market capitalisation which stand at USD22.4bn, making the company the world's second largest cement producer in terms of market capitalisation after Holcim .

Dangote Joins Big Players
Cement Producers Market Capitalisations, US$mn

Dangote's rise comes after a series of impressive financial performances over the past few years. In FY2012 Dangote reported EBITDA of US$1.1bn, with an EBITDA margin of 58.3% (compared to 55.4% in FY2011) . Bloomberg consensus estimates Dangote's 2013 EBITDA will be US$1.58bn, a 44% increase, which would be in line with the meteoric rise the company has seen over the past four years - in 2009 EBITDA stood at just US$388.6mn.

Supporting the company's continued growth is its pan-African expansion plans. Already present in Nigeria, Benin, Ghana, Congo, Tanzania, Senegal, South Africa and Zambia, the company's investment plans will see its capacity greatly increase across Africa, putting it in a position to really take advantage of its exposure to some of the impressive growth rates we are forecasting across the continent. In May 2013 the company began construction on its US $ 500mn Tanzanian cement plant, which should take 22 months to complete. Other new plants include greenfield projects in Zambia, Cameroon and Senegal, which will each have a capacity of 1.5 million tonnes per annum.

Growth Supports Expansion Plans
Selected Sub-Saharan African Construction Industries Real Growth Forecasts (% year-on-year)

The company has a 60% share of the African cement market, but only an 80% capacity utilisation indicating potential for capacity expansion without substantial capital investment outlay. As such and coupled with their expansion plans, we are optimistic on the chances for Dangote to capitalise on sub-Saharan Africa's outperforming construction industry. In particular, their home market of Nigeria as Africa's second largest economy will provide huge opportunities and scale for the company; we are forecasting an average of 9.4% real growth between 2013 and 2022.

This article is tagged to:
Sector: Infrastructure
Geography: Nigeria

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