By Eugene Onyeji
To the Board of Directors of Dangote Cement Plc, led by Alhaji Aliko Dangote, GCON, keeping smiles on the faces of shareholders is a major guiding principle.
But of course, like all such principles, there is always the opportunity cost. The board has decided to retain same dividend paid out in 2018 operating year even when almost all the essential performance indicators headed downwards.
Revenue dropped 1.1 per cent to N891.7bn when compared with the 2018 figure of N901.2bn, profit before tax dropped even more sharply and consequently, return on capital employed (ROE) came to only 22.34 per cent as against 39.56 per cent in 2018 financial year. Operating profit of N299.9bn was 11.5 per cent lower than the N338.7bn for 2018 at a margin of 33.6 per cent (2018: 37.6 per cent) driven by higher discounts in key markets and distribution costs.
In other words, everyone looking for conservative Directors to honour, had better give Dangote Cement Plc a pass. Shareholders’ immediate smiles command premium attention at Dangote Cement Plc, Africa’s largest cement producer with existing operations in 10 African countries.
And indeed, the shareholders have been smiling broadly as N272.6 billion was placed on the table as distributable dividend. The costs of this dividend policy are easy to identify as well. The directors cut out from the retain earnings and proceeded to declare a dividend of N16 per share from earnings per share (EPS) of N11.79.
And all things being equal, the shareholders will meet on June 15 this year to approve the dividend and by June 16, 2020, the shareholders would have cornered about 35.7 percent above N200.9bn earned as profit for the period attributable to owners of the Company.
Let it be noted though, time may not be that the economy are accelerating at the neck break speed that we all expect that it will or should, but it is nonetheless moving. Which is why Joe Makoju, the Group Chief Executive Officer is upbeat about their performance and he says, “Dangote Cement maintained strong financial performance despite a low growth environment, pricing pressure and increasing competition in key markets. The Nigerian operations maintained volume and revenue performance in a challenging environment. Export sales were affected by the border closure in the second half of 2019. Looking ahead, I expect an increase in volumes in 2020 as we commence clinker exports via shipping from Nigeria.”
And the outlook! Dangote and his team believes that, “Despite the subdued economic growth estimated for 2020, the cement market is expected to show growth. This is due to the government’s drive to increase revenues and focus on increasing infrastructure spending. Exports are expected to increase in 2020 as Dangote Cement will commence exporting clinker from the Apapa and Onne ports to West and Central Africa.”
It makes one wonder how much more could be achieved by Dangote Cement if the shareholders smiled a little less broadly in order to provide biggest savings to be deployed on the business.
One dare ask, can this dividend policy be sustained? Only time will tell.