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Edited Transcript of DANGCEM.LA earnings conference call or presentation 26-Feb-20 2:00pm GMT

Q4 2019 Dangote Cement PLC Earnings Call

Mar 23, 2020 (Thomson StreetEvents) -- Edited Transcript of Dangote Cement Plc earnings conference call or presentation Wednesday, February 26, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Arvind Pathak

Dangote Cement Plc - Deputy Group MD, COO & Director

* Guillaume Moyen

Dangote Cement Plc - Acting Group CFO

* Joseph Makoju;Group CEO and Director

* Michel Puchercos

Dangote Cement Plc - Group CEO & Director

* Temilade Aduroja

Dangote Cement Plc - Head of IR

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Conference Call Participants

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* Janet Ogunkoya

ARM Research - Analyst

* Onyeka Ijeoma

Vetiva Capital Management Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, and good afternoon, ladies and gentlemen, and welcome to the Dangote Cement Full Year 2019 Results Conference Call.

(Operator Instructions)

I will now hand the call over to Temi Aduroja, Head of Investor Relations. Please go ahead.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [2]

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Good afternoon, and welcome to Dangote Cement Full Year 2019 Results Call. We would like to apologize for starting one hour late and for starting a few minutes late as well. My name is Temi Aduroja, Head of Investor Relations for Dangote Cement Plc. On the call today, we have the outgoing Group MD, Joe Makoju; the incoming Group MD, Michel Puchercos; and the Group CFO, Guillaume Moyen. We will have a question-and-answer session after the presentation.

Over to you, Joe.

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Joseph Makoju;Group CEO and Director, [3]

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Thank you very much, Temi. Please let me start off also by offering our apologies for keeping you waiting. It's my pleasure to welcome you all to this conference call to discuss our results for the full year period up to 31st of December 2019. As you've already been told by Temi, this will be my final conference call here at Dangote Cement. As you're all aware, after 45 years of practice that is, most of it is the industry, I have now retired. And after 10 years -- the last 10 years working for the Dangote Group in various capacity too. We have a, what I say accomplished -- we have in that time achieved a great deal since I joined. And indeed, it has been an honor and a stringent memorable experience for me.

Looking at our 2019 results, you have the detailed presentation which I would like to start referring to, and we can begin from Page 2 of that, where you can see our full year results.

From Page 2, you can see that our financial performance by the end of 2019 was affected by several factors, including intense competition across key markets, we had pricing pressure in Nigeria and had some challenges in Ethiopia, a very crucial market for Pan-Africa. As a result, group revenue was down marginally 1.1%, down to NGN 891.7 billion in 2019. And group EBITDA was down 9.2% to NGN 395.4 billion when compared to the previous year 2018.

On the operational side, group volumes were up, '19 results, marginally 0.6% to 23.7 metric -- million tonnes during the year. This was -- we saw a ramp-up of volumes in Pan-Africa, most notably in Tanzania where volumes, including clinker sales, increased by 94% year-on-year. So Tanzania was very good for future, so the improvement in Pan-Africa.

In Nigeria, our successful promotion, in fact, Bag of Goodies. We launched this in July, and it helped to drive strong growth in Nigerian volumes in the third quarter. Nationwide, the volumes remained relatively flat at 14.1 million tonnes in spite of a new capacity from BUA, one of our competitors. So when you take it in this respect, against that background, our performance was, at least we would like to think, an achievement for us. Pan-Africa volumes were up 1.9% like-for-like that we have thanks to good performance noticeably in Tanzania and also in Senegal.

If you go on to Page 3 of the presentation, you see the financial performance in more detail. If you remember, in 2018, we had -- we recorded a tax credit, a special tax credit of NGN 133.7 billion from prior year Pioneer taxes. That helped [refurbish] our 2018 earnings per share to NGN 22.83. Excluding this one-off tax credit, our EPS is down 21% to NGN 11.7 per share.

Going on to the next page, 4, you will see there our full year EBITDA development in more detail. And you will see that this year, only our plant in Congo remains challenged in terms of positive contribution at EBITDA level.

And then on Page 5, you will see the movement in cash in 2019. Our net debt ending of as at 31st December of NGN 227.5 billion.

On Page 6, our balance sheet remains strong, and it has allowed us to pursue successful commercial paper issuance in Nigeria. Our latest issuance in December allows us to achieve very competitive revenue stream. You can see more detail of the Nigerian market performance on Page 7, where we're able to maintain our market share in the mid-60s.

Dangote Cement grew 14.1 million tonnes in Nigeria, excluding materials, and 13.7 metric tonnes of that in domestic markets and 0.45 million tonnes exported to neighboring countries. As you are aware, our export market in 2019 was affected by the border closure for most part of 2019.

Revenue was down year-on-year owing to this flat volumes and the aggressive discounting by the competition that impacts of the markets to which we have to respond.

EBITDA was further eroded the increase in transport costs. Our strategy for transport integration to improve the quality of service and reach untapped markets more efficiently is now fully deployed in Nigeria. In addition, the cost of the successful Q3 promotions that I had earlier mentioned did increase our marketing and sales cost.

Turning to Page 8, you will see Nigeria's macro environment remains subdued in 2019 with only a growth of 2.3%. From our previous conference calls, you'll remember that this is because of the negative effect that the election cycles have had on our industry as well as the reduced infrastructure spending during the year.

In addition, the consumer demand also remained weak, with headline inflation at [11.2%] for the full year. And this situation was further worsened by the border closure that we had in August 2019.

Having said that, we are, however, very, very optimistic about the cement market in 2020. Things are of course off to a good start and we expect to see some increase in infrastructure spending, especially with increased revenue strides and material sales in this coverage and a better coverage.

On Page 8 of the presentation, we show the public-private partnership projects (inaudible) where Dangote is leading the Apapa-Oshodi-Oworonsoki highway construction project in Lagos. And this reconstruction is being done in concrete state.

At Page 9 shows our EBITDA per tonne development. If you remember, we did raise prices by NGN 159 in April. The impact of that is there from about mid-May because of this expansion of presales at the old price. Our average realized price came in at NGN 43,103 a tonne for the fourth quarter. That's where we ended up in the fourth quarter. And this in fact actually confirms the ability of the market to continue to offset price increases. And on Page 10 you can see the Nigerian price development.

Page 11 analyzes our cash costs, which was $33.6 per tonne in the full year 2019. And you can see what the main costs are, as usual. Kiln Fuel and Power Plant cost which both represent 44% of our total cash cost in 2018 and reduced to 39% in 2019.

On Page 12, next page, you can see our progress in the rest of Africa, where Pan-Africa revenues of NGN 282.7 billion were 0.2% lower than NGN 283 billion of 2018, while EBITDA was down 2.5% to NGN 47.9 billion. However, sales volumes were up 1.9% up to 9.6 billion tonnes in 2019. I'm pleased to report that Tanzania volumes, as I said earlier, were up by 94% from 2018.

A ramp-up in Sierra Leone have increased volumes there by over 116%, too small but still very satisfied with the performance there. In addition, Senegal is now running at more than 100% rated capacity due to the higher proportion of our 42.5-grade cement. However, Ethiopia's volumes were down, going through some technical challenges, and we also had a period of power rationing.

Going over the other pages, you find highlights from our Pan-Africa operations. With an extremely good market share in Cameroon, 39% market share. There was still a decrease in volume against the security challenges in the Northwest and Southwest region of the country as well as the pressure from a new competitor that entered the market.

In Congo, sales were up 11.5%. The market in Congo, as you know, is still very small, and we have been looking at growing exports to neighboring countries.

In Ethiopia, sales in the full year '19, as I told you, fell by 4% affected by the shortage of raw material due to some challenges with the quarry at this time.

On Page 14, you see Ghana produce was down 34%, owing to our deliberate strategic intend to play in only profitable regions of the country. And as such, Ghana contributed profitability at EBITDA level which is an improvement from the previous year.

Our sales output in Senegal, I'm happy to report, is more than 100% of the plant's rated capacity. We sold more than 1.4 million tonnes of cement in full year 2019 and this is up 8.4% compared to the previous year. Our market share improved to 23% from 19% in 2018, and we have continued our exports to Mali.

The cement market is Sierra Leone continues also to improve. We're looking to increase the building projects in the country. Our volumes were up 116% to 236,000 tonnes

(technical difficulty)

full year of '19 in Sierra Leone. And we achieved a market share of about 35%.

Over to Page 15 and you'll see that South Africa's economy remains subdued and the cement market still relatively depressed, owing to lack of investment and the lack of competitive markets where we still see some import coming in and distorting the market. Our sales there were down 9% year-on-year.

Tanzania's GDP growth remains strong, and we are witnessing an increase in infrastructure spending. Our sales volume were up 94% to 1.2 million tonnes. And we expect our cash cost to further reduce once our thermal and gas power plant is completed later this year.

Market demand in Zambia is expected to grow due to increase their spending on infrastructure projects. Dangote Cement in Zambia increased volumes by 5.6% to 975,000 tonnes for the year. We have implemented the use of sawdust as an alternative to coal in our on-site power station to help reduce cost.

On Page 16, we've highlighted our key ESG impacts, which includes the geographical diversity of our Board and most of that is well as operational. And we also pride ourselves on the operational efficiency of our plants. And Dangote still remains certainly being one of the highest employers of labor in the markets we operate, so distinguished share.

That is just to mention, to summarize, we've undoubtedly seen several challenges in 2019 looking back but we still enter 2020 feeling very financially strong, and we position to -- continue to position ourselves as Africa's leading cement company, ready to take advantage of the growth in Africa when economic conditions recover in our key markets. So we remain positive, and we continue to do our best against competition and keep our share of the market.

And I hope you are aware that we are preparing to commence a share buyback program in this year 2020, and the process started with an EGM in early January. While shareholders show tremendous support for the buyback, this process is ongoing. And of course, the speed of it depends on various regulatory approvals.

We have shown our outlook for 2020 on Page 17, where we plan to improve our route to market and continue our promotional campaign to support volume growth in 2020. We also finally will commence exporting clinker to west and central Africa from Nigeria via the ports in Apapa and Onne this year. We have plans for cost improvement across all our operations. And we're also expecting at the end of this year our grinding plant in Côte d'Ivoire should come on stream.

Before moving on to the question-and-answers, let me take this opportunity to once again to say my final farewell to you all after 45 years of working in the cement industry, and particularly to welcome my successor, our new CEO of Dangote Cement, Mr. Michel Puchercos. As this happens, I'm very happy he's here with me at this presentation. He effectively took over from February 1, and he's very much already holding the steering wheel.

Michel has over 20 years experience in the cement industry. And he certainly has traversed the cement industry globally coming from the world's largest cement group, LafargeHolcim, in a career that was spend in strategy, operations in Europe, in Asia, in fact, spend some years in Korea, and then, happy to say for us, also spend quite a large part of his experience in Africa, in East Africa, in Kenya and coming back home here he's no stranger, has been in Nigeria for the last 4 years where he was CEO of -- worked for Lafarge, a job I also held some years back. So Michel is most welcome, and I wish him a -- I'm sure you all join me in wishing him the very best of luck and pleased to show you and extend to him strong interest you've always had in growing Dangote Cement, which I expect to see make progress set in this direction that is there during his tenure under his leadership.

So Michel, over to you.

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Michel Puchercos, Dangote Cement Plc - Group CEO & Director [4]

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Thank you very much for the introduction, Joe, and for your continuous support during this transition. I wish you well on your new endeavors. And I know you will be very much missed here at Dangote.

Good afternoon, everybody. I'm delighted to have taken on this role and look forward to exciting times ahead at Dangote Cement.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [5]

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Thank you, Michel. We are now open for question and answers, please. If you do not have the presentation, please log on to Dangote Cement's website and download the presentation from there.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question is from Onyeka Ijeoma from Vetiva Capital.

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Onyeka Ijeoma, Vetiva Capital Management Limited, Research Division - Research Analyst [2]

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I just have a few questions. The firstly, is for the Nigerian market, I also understand, can we expect the similar promos like the Bag of Goodies promo to continue to run throughout 2020 as it has been a key driver of volumes for last year, 2019? And if the answer is yes, what do you guys see as the efforts from competitors? Also, the share buyback, I want to understand, just because I'm not familiar with some of the detail. Did it happen last months or will it happen over time? And if it's going to -- will it happen at one time, do you happen to know that time? And also I'm looking for some (inaudible) fund guidance for group for FY '20. Then for the (inaudible) market, I saw that your pricing, I think, is down in the year. I want to know where the pricing challenges have been coming from, what specific countries? Also, the Ethiopia quarry issue, can you shed more light on that? And has it changed? What's the outlook on that? Then on the Senegal market, you're currently operating at over 100% capacity. From my last communication with management, I was made to understand that the capacity -- the increased capacity was Kiln capacity where the grinding capacity was higher than that as we take more. And so if we could get more clinker from other countries, we'll be able to continue to (inaudible). I want to know what the grinding capacity so that I'll be able to deduce what percentage that accounts to. And then, yes, that's it.

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Joseph Makoju;Group CEO and Director, [3]

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Will you take this share buyback? Then I will take the rest.

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Guillaume Moyen, Dangote Cement Plc - Acting Group CFO [4]

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So thank you for these questions. So regarding the buyback, maybe just to give you a bit of a legal timeline that we have with us. So technically, we are still in the middle of the process of securing the regulatory authorizations. So once we will have been securing these authorizations, we will look at deploying this program over time. So it will not be a one-off movement, but more -- something we will deploy over the coming 12 months.

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Arvind Pathak, Dangote Cement Plc - Deputy Group MD, COO & Director [5]

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I'm Arvind Pathak, Deputy GMD. This is response to the query on the Senegal wherein it was said that we're operating at full capacity. Our Kiln capacity is almost around 1.5 million tonnes. And with that, we can get a grinding capacity of almost 2 million tonnes. So Ethiopia, we are almost at capacity of -- clinkering capacity of 1.9 million tonnes, which gives us a cement grinding capacity of 3 million tonnes.

Pricing challenges, most of the countries, we could see some improvement in the pricing in the local currency, except for few selected markets that were mainly in Zambia and in South Africa, to an extent also in Nigeria. Trust we've responded to your query.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [6]

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Next question is from (inaudible).

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Unidentified Analyst, [7]

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I have a question and I have a feedback. I think, going forward, much more, it would much nice that if the results can be sent much more earlier for the purpose of our analysis because the results was maybe sent like 15 minutes to the conference call. So that's what is on the feedback. And on my question, the first question is, I understand that you increased prices by 7%, that was sometimes in April. And in this, on my calculation, I can see the average prices were down by 31.33% and then volume remains slightly flat. So I'm saying given the competitive climate, do you think this price increase is sustainable? That was the first question.

And for the second one, in terms of your competitors, so we notice that there is a new competitor and that's BUA with their recent merger, and they are coming up with additional 3 million tonnes in 2020. How do you intent to respond to this stress? And also, is it something that we should be looking forward like as happening with this sector? That was the second question.

For the third question, on your plant capacity. So you earlier mentioned during the conference call that there is a cement and clinker export coming up in Lagos and Cote d'Ivoire for December and January 2020. So I want to know if this new excellent export terminal is now on stream? And also, can we just have a sense of the estimated cost of this terminal? So this leads me to my fourth question.

On the fourth question, I want to understand your top line growth in terms of the breakdown between the government and private sector, so you said earlier that revenue at H1, you said, and you didn't see a lot of traction from government sector. So I want to have a sense of it. How has it changed now in terms of the breakdown between government and private sector? So the fifth question is on your London IPO. So I want to ask, is there any update on -- if you can give an update on the London IPO? And also, this is my final question, is in terms of your target capital structure. So at that FY 2018 outlook, I'm unable to check for FY 2019 because of the delay in the results. So I notice that your debt-to-equity in terms of total capital is 26% and 74%. So are you looking -- are you considering adding more debt? Are you considering adding additional debt to the group given the, I guess, capital structure? So just to have a sense of your capital structure. I think that is my questions.

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Michel Puchercos, Dangote Cement Plc - Group CEO & Director [8]

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Thank you for these questions. So maybe I will cover capital structure and London IPO questions first. The London IPO at the moment is still under review. And as mentioned during previous calls, we are looking at several factors to define if the momentum is right for us to do this type of movement for the company. So we are still looking at it actively.

In terms of capital structure, we can indicate that, obviously, as any company, we are always looking at the right mix of debt and equity to maximize value for the shareholder. And you obviously are monitoring the representation of (inaudible) that we have been announcing the dividend of NGN 16, which is coming after the results of 2019. We are maintaining the figure of dividend of last year. And this is part of the logic that we are finding -- in terms of finding the way we want to return cash to the shareholders. At the same time, you also notice that, during Joe's speech, the presentation of the indebtedness of the company, he was mentioning our access in the local markets at very competitive rates. We are also looking at the options that we can find in Nigeria to finance the company at better costs.

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Joseph Makoju;Group CEO and Director, [9]

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And just quickly to the response to your other questions. Apologies for the short notice in getting the results to you. And we definitely promise going forward to improve on that, and try and get the results to you on time for you to study before the call, future call.

On price increases, whether they are sustainable, I mean, our reading of the market is that the market is strong. There's a lot of untapped demand in Nigeria. When you compare the capital consumption in Nigeria with neighboring, some of the neighboring countries, sure there is a lot of room. So we're going to be driving for reaching out into the untapped areas, the demand will increase. And we are confident too that as the markets also firms up, we continue to have opportunities to gradually adjust our prices to keep up our margins. And as it is that, going forward, prospects are strong that the market will be able to take moderate price increases over a period of time. As for BUA, BUA is not -- the volume for BUA is not new. It's already stabilized. That volume you mentioned, the way you mentioned is that this is just coming on now. No, it's already been in the market for over a year now. And so there's really no new incremental volume coming in, in the last 1 year. And so the market can pretty well decide now between these 3 big players. And then we really believe that everybody is working at to take advantage of the opportunities that should come. It goes to your other question about the split between government and private sector. And the government spending has slowed. This fluctuates from time to time. What we find is the private sector consumption is predictably stable and gradually increasing year-on-year. And lots of housing construction privately funded. And also, we're beginning to see some more PPP projects where private sector are funding infrastructure projects. So that -- definitely that volume is a very important volume for us and is continuing to increase. The good news is, adding to this year, we're beginning to see comprehensive government spending also on infrastructure, also improving. So I can see government consumption of cement this year definitely will be a big improvement on last year. So I think that's where we are. Thank you very much.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [10]

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And the next question from [Paul] (inaudible).

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Unidentified Analyst, [11]

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I have a couple of questions. First of all, we understand that your main competitor, Lafarge Africa, has pushed mid-single digits increases, price increases in January in Nigeria. My question is, are you planning to increase prices as well? Second, could you please discuss a bit about the situation in South Africa because I kind of understand it while looking at the numbers, I didn't have too much time to look at the number but I understand that the volumes -- your volumes were not so bad in 4Q? Am I missing something here? And last question is for Mr. Puchercos. Could you please share with us your vision and strategy for Dangote Cement?

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Joseph Makoju;Group CEO and Director, [12]

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Price increases, I think the answer to your question is -- your question is very similar to the previous caller on what are the prospects for price increases. Now, see, about that, a major competitor, Lafarge, has a top quality the reason of its prices, we have the same position, too. That's our own reading of the market, too. So what we tend to have in Nigeria too is that the pricing in the region is cyclical and the opportunities come in the peak season, the dry season where demand shoots up. And one can have opportunity to ease up the price and still can have this very big slump during the rainy season. So that's why one has to be moderate about price adjustment because you don't really want to be going up and down. If you take the general Nigerian market, like I said, altogether, 2020 is looking good compared to 2019. We expect to see the volumes increase. And I think it is to be for all the players, not just us, but in our case, we've been fighting aggressively not only to maintain our market share but to increase it. We've tried in various -- where we have the edge, penetrating the tough market. We've particularly been focusing on that area, such as increase our market share.

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Michel Puchercos, Dangote Cement Plc - Group CEO & Director [13]

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As far as our strategy is concerned, it is very clear that the strategy Dangote has developed and presented over the last years have been proven successful, and the details of which being given in the documents and being the underlying comments of Joe Makoju when presenting the 2019 results. So my intention is just to keep on the same trend and the same strategy that's proven successful, and being the -- Joe's successor, I'll do my best to contemplate and improve in the direction Joe already given to the company.

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Joseph Makoju;Group CEO and Director, [14]

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And just one point I missed, you asked about South Africa. Your vision is quite right about the fourth quarter that things are beginning to look up at least in South Africa. It looks that finally, as the new government is beginning to win confidence back, it's early days, let's say, if those trends are maintained into 2020, we will expect to see things begin to improve. We've also done a few things in the market in South Africa. We've introduced new products that has also helped improve our market performance. So we are hopeful that things will improve in South Africa.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [15]

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Okay. Thank you. Next question is from Janet Ogunkoya.

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Janet Ogunkoya, ARM Research - Analyst [16]

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My question would be around the -- just my concerns regarding the cash flow. So I understand the intent to satisfy shareholders and all of that with the dividends and also with the share buyback plan. But my concerns really are, it's almost like erosion of all the free cash flow available on the -- on your books truly. So I mean, even if you does estimate how much-planned buyback you're expecting at the -- as an average of 160, you're already talking to NGN 72 billion. And just my concern is, I would just like to get verification from your end if -- I mean, what your plans are to sort things out on your cash flows? And if you're actually confident you can accommodate this going forward?

And then also, I think I have a clarification needed on the -- for the export terminals you intended to open up, I don't know. I think those must be opened up this year. Could you give an update on that? And then, yes, I think those are basically my major questions.

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Guillaume Moyen, Dangote Cement Plc - Acting Group CFO [17]

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Thank you for your question on the cash flow. So at the moment, through this program, we have thought the buyback is presenting an option up to 10%. So this is the mandate we have received from our shareholders and eventually, that will be exercised if we consider that this is the right thing to do over the coming 12 months. Now in terms of financing the buyback itself, as we were mentioning earlier, maybe you notice that historically, we have been structuring our debt financing on a short-term basis and maybe we see the need to consider other options at the moment to stabilize our debt structure and cost. These are solutions which are explored at the moment. And that obviously will give us some room if you see like the operational cash flow for other things and investments that we have put in the past or eventually the distribution of dividends to shareholders.

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Arvind Pathak, Dangote Cement Plc - Deputy Group MD, COO & Director [18]

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So the 2 export terminals that we are creating in Nigeria are currently under commissioning.

We've already completed normal trials. We are completing the road trials. And the last bit of commissioning is leftover. Slightly received a setback because some of our commissioning engineers were too far from coronavirus-affected countries. We are in the last leg, and we hope from the next month onwards, our export to start from this terminal.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [19]

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Thank you. Next question is from (inaudible).

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Unidentified Analyst, [20]

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I think some of my questions have already been addressed but I still have a couple. So considering the fact that expenses were quite boosted by the increased promotions and campaigns, do we still expect that to be sustained in full year 2020? And also, do we also expect to see EBITDA impact on Nigerian revenues? Also, in the computation of income tax, we saw that there was a particular line item of about NGN 30 billion. And I think it's really effects on commencement rule. I think I would like to get more color on that particular line.

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Joseph Makoju;Group CEO and Director, [21]

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Okay. So thank you for the question. Maybe I will start with the facts I mentioned that you raised. So as you eventually know, some of our lines were still under Pioneer status and our -- and some have been reaching the end of their Pioneer status a few days back -- sorry, a few years back. And basically, at the moment, what you see in terms of application of the commencement rule for response to the lines which has been exiting their Pioneer status in the past 2 to 3 years, and we are now moving them to a different situation in terms of flexibility of the reasons as per the regulation in Nigeria. The other question, I guess, was related to promotion element. So we are not commenting specifically on the actions which will be taken in 2020 on them.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [22]

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So we'll be taking 2 more questions. And the first one is from (inaudible).

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Unidentified Analyst, [23]

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My first question, the only question that has not been answered goes with just the transports have on EBITDA. So I remember the last conference call, I think for the first half of the year, you said that transportation was weighing on EBITDA. And this time around again, almost 10% EBITDA in there. So is there a way to -- is there a plan to peg on that, what's your plan to peg on transportation? And then secondly, any plans to increase capacity, added production capacity generally in Pan-Africa, in Nigeria and just checking on if there's any plans for capacity increase elsewhere?

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Arvind Pathak, Dangote Cement Plc - Deputy Group MD, COO & Director [24]

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Okay. On the transport part, we have reviewed our logistics strategy. And under the renewed strategy, we found it more efficient and more customer-oriented and focused, if you go to a direct delivery model. So in 2019, we adopted this model and as a result of this, our direct delivery to the customers increased. And that is the one which explains this variance. And it is on the back of deciding that we could retain our market share, and with the -- obviously being in consultation that for majority part of the 2019, we didn't have the export volumes which we were having in the previous year. As regards the capacity, there are 2 projects are underway in Nigeria. One is Line 5 in Obajana and one is adjoining Okpella one more unit is under construction.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [25]

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Thank you. Our last question is from (inaudible).

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Unidentified Analyst, [26]

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So just a quick feedback, I thought you'd quickly read a transcripts for this conference call because the audio is really poor. So first, here is my questions. So the first question I would like you to answer is, so if you factor in how much dividend you're paying, NGN 16, but looking like 150% payout ratio. You capture how much this year will be spent on the share buyback, about NGN 280 billion. So where is the cash going to come from? So are we expecting you to be in the market more, a bond, a commercial paper, what is your guidance towards debt issuance in 2020? Also, we know that you are constructing several routes in Nigeria in cement and it's (inaudible) the original structure. So how you are going to apply some of that tax rate to your subsidiaries. So giving us forward guidance towards what's the expected capacity in 2020 because we are expecting the upper house to be fully constructed this year, the tax rates on that rate should be applied. So what is the guidance for the subsidiaries instead of tax savings? Also, we know you're constructing Mtwara power plants in Nigeria. Obviously, you have not said anything about status, when it is expected would be forecast. So picking up on the last station of the (inaudible) do you plan or do you consider at any point in time to be consolidating your trucks to other transport and logistics businesses in the P&L structure. We'd also like to understand what is the bulk financing looking like? We have seen a number of documents used to applying Lagos, so what is then it's likely contribution to your revenue. I think that will be most of the (inaudible) for now.

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Guillaume Moyen, Dangote Cement Plc - Acting Group CFO [27]

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Okay. So thank you for your question. So on the financing of the buyback and the dividend, I covered that during the previous question, but just to give you context, as mentioned earlier. As we said, we have a different opportunity in terms of financing our long-term investments with accessing the debt market if relevant for the company. So that's one thing that we are considering actively. Obviously, our free cash flow generation has been very strong still in 2019, and we envision that this trend will remain in 2020. So that will be, for us, finding a combination of debt and equity to structure the most part of the financing for this operations.

When we look at the concept of the tax rate that we are -- or the tax rates that we have applied in Nigeria, there are 2 factors that we can consider. The first one is that, obviously, there is still an opportunity for us to apply the Pioneer status to some of our lines which are under construction which is still to deliver in 2020, and we have also the opportunity which is given by different aspects of the tax code (inaudible) now that there were several changes in 2020. One of the things that we obviously look for is to leverage on the incentive we are getting to export across the region. So as mentioned by Joe and my colleague, Arvind, we definitely have a strong appetite to enter in the region at different levels. And as you know, as being a member of the ECOWAS Economic Zone, we are also benefiting from some specific environments to reduce the tax friction when we want to export in the region.

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Temilade Aduroja, Dangote Cement Plc - Head of IR [28]

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Thank you. We're now done with the question-and-answer session. If you have any further questions, please send me an e-mail on temilade.aduroja@dangotecement.com. Thank you so much for taking this call, and thank you for your questions. Have a good evening.

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Operator [29]

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Thank you very much. That concludes today's call. You can now hang up.