Dangote Cement reported a 3.8% y/y growth in Revenue to N249.2bn in Q1 2020. The growth in group revenue was solely driven by an improvement in revenue from its Nigerian operations (up 5.6% y/y to N179.3bn) amidst a flattish performance from Pan African operations (down 0.6% y/y to N69.8bn). We expect the impact of COVID-19 to have a more profound impact on Nigeria Sales in Q2-2020, given that Lagos, Ogun, and the FCT went on full lockdown from 30 March. Although the lockdown measures were relaxed on 4 May, economic activities are yet to return to pre-COVID-19 levels.
Similarly, we expect weaker Revenue from Pan African Operations driven by weakness in South Africa (poor macro conditions, lockdown in the last week of March amidst weak infrastructure spending by the government), Tanzania (production challenges and unfavorable weather conditions) and Zambia (the economy slipped into recession in Q1, leading to a decline in the cement market) to have a material impact on overall Pan African sales volumes. As such, we have made marginal adjustments to our forecasts.
Review of Q1 2020 performance
Q1 2020 Revenue grew 3.8% y/y to N249.2bn. The growth in group revenue was solely driven by an improvement in revenue from its Nigerian operations (up 5.6% y/y to N179.3bn) amidst a flattish performance from Pan African operations (down 0.6% y/y to N69.8bn). On a q/q basis, we note that group revenue grew stronger, up 17.6% q/q, again on the back of a sturdy growth from Nigerian operations (up 26% q/q). We believe the growth in revenue from Nigerian operations reflects stronger demand for cement particularly in the months of January and February which more than compensated for the slowdown in March due to headwinds triggered by the outbreak of the global pandemic. Notably, cement sales volumes grew by 0.7% y/y to 4.0MT, the highest Q1 volume in the last four years. However, we note that the momentum in sales volumes has slowed down, following the lockdown implemented in states such as Lagos, Ogun, and the Federal Capital Territory (FCT).
EBITDA grew 2.2% y/y to N114.2bn. The low single-digit growth in EBITDA was due to a higher increase in cost of sales adjusted for depreciation (up 6.3% y/y) compared to the growth in revenue (up 3.8%…