Dangote Cement Plc has faced a significant drop in profitability as net profit margins reached their lowest level in six years, with analysts expressing concern over the company’s growing financial strain.
Thank you for reading this post, don't forget to subscribe!According to data compiled by MoneyCentral, the company’s net profit margins for Full Year 2024 fell to 14.06%, down from 20.63% in 2023 and 43.31% in 2018. Analysts speaking with Naija247news attributed the sharp decline to rising borrowing costs and growing interest expenses.
The company’s return on average equity (ROAE) also dropped to 25.80% in December 2024, down from 32.49% in 2023. Analysts noted that Dangote Cement’s management is struggling to effectively deploy investors’ capital, with rising debt and interest expenses outpacing profitability.
Finance costs surged dramatically by 21.03%, reaching N448.08 billion in December 2024, compared to N144.53 billion the previous year. This surge in interest expenses reflects the growing pressures of inflation and the Central Bank of Nigeria’s sustained high monetary policy rate of 27.50%, which has escalated the cost of financing.
The company’s total debt has skyrocketed by 160.39% to N2.63 trillion in December 2024, up from N1.01 trillion in December 2023. This increase in debt is largely driven by the rising cost of capital as firms turn to debt financing amid a challenging economic environment marked by inflation and high interest rates.
Despite these challenges, Dangote Cement remains financially stable enough to cover its interest payments, with no immediate threat to its going concern. However, analysts warn that the company may face growing difficulty in managing its mounting debt, which could limit its ability to generate shareholder value.
In terms of performance, Dangote Cement saw a 62.72% increase in sales, which rose to N3.58 trillion in the period under review.
The sales growth was largely driven by price hikes implemented to offset rising input costs. Profit after tax (PAT) increased by 10.46%, reaching N503.24 billion in December 2024, compared to N455.58 billion in 2023.
While these gains offer some respite, analysts remain cautious about the company’s long-term financial health in light of its increasing debt burden and shrinking profit margins.
