November 2016 At a glance Largest independent cement producer in - - PowerPoint PPT Presentation

November 2016

At a glance

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• Largest independent cement producer in Africa, 44Mta capacity operational as of October 2016

– 29.3Mta capacity across three state-of-the-art plants in Nigeria, Sub-Saharan Africa’s largest cement market – 1.5Mta due onstream in Congo in Q4 2016, and 0.7Mta import facility in Sierra Leone

• Delivering strong financial and operating performance

– FY 2015 revenues of ₦491.7bn – FY 2015 EBITDA of ₦262.4bn at 53.4% margin – 9M 2016 net debt of ₦286.3B

• Creating a diversified pan-African business profile

– Target of >75Mta capacity in 17 countries

• Largest company on Nigerian Stock Exchange

– Market capitalisation $10bn; ca. 30% of total NSE capitalisation – A bellwether on the cement sector and on Africa’s growth

Strong Financial Growth

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57.8% 55.5% 58.3% 59.5% 57.0% 53.4% 50% 51% 52% 53% 54% 55% 56% 57% 58% 59% 60% 100 200 300 400 500 600 2010 2011 2012 2013 2014 2015 Revenues (₦B) EBITDA (₦B) EBITDA margin (%)

19.4% CAGR 17.5% CAGR

₦B

2 4 6 8 10 12 14 16 18 20 2010 2011 2012 2013 2014 2015

Nigeria (manufactured) Nigeria (imported) Cameroon Congo Ethiopia Ghana Senegal Sierra Leone South Africa Tanzania Zambia

Strong Volume Growth

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19.5% CAGR

Increasing proportion of non-Nigerian volumes as new plants achieve good gains in market share

Million tonnes

Our Presence – Existing and Planned

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• Present capacity 43.6Mta across 8 countries
• Nigeria – 29.25Mta
• South Africa – 3.3Mta
• Tanzania – 3.0Mta
• Ethiopia – 2.5Mta
• Senegal – 1.5Mta
• Cameroon – 1.5Mta
• Zambia – 1.5Mta
• Ghana – 1.0Mta
• 2.2Mta new capacity coming online in Q4
• 1.5Mta integrated plant in Congo
• 0.7Mta import facility in Sierra Leone in Q4
• Remain committed to scale of expansion
• But expansion schedule will depend on FX availability
• Priorities will be:
• 1. New markets able to generate FX for Group
• 2. Increasing utilization of existing assets
• 3. Brownfield expansions
• Group aims to be >75Mta and a top-5 producer

Senegal 1.5-3.0 Mta Ghana 2.5 Mta Cameroon 1.5-3.0 Mta Ethiopia 5.0 Mta Tanzania 3.0 Mta Zambia 1.5-3.0 Mta South Africa 3.3 Mta Liberia 0.5 Mta Côte d’Ivoire 3.0 Mta Kenya 1.5-3.0 Mta Zimbabwe 1.5 Mta Congo 1.5 Mta Niger 1.5 Mta Mali 1.5 Mta Nigeria 38-41 Mta Sierra Leone 0.7 Mta

Why Sub-Saharan Africa? Why Cement?

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Cement demand driven by increasing population, urbanisation and prosperity Sub-Saharan Africa significantly lags global average per-capita cement consumption Huge opportunity for African producers to expand, replace imports, especially in West Africa, much of which lacks limestone Africa is the last major growth market for cement with relatively little surplus capacity at present High capital cost of entry, construction time and access to resources are key barriers to entry Key markets are Nigeria, Ethiopia, South Africa; cement ‘majors’ with high net debt/EBITDA are less able to take on additional debt to to finance entry to these markets Cement is an essential building material with no viable substitutes, Africa needs billions of tonnes in the coming decades

Dangote Cement is the only large-scale player in Sub-Saharan African Cement markets

Many incumbents are sub- scale, use older technologies, so are vulnerable to well- funded industry disruptors

Overview of African Cement Market

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• Increasing political stability enabling rapid economic growth
• Steady population growth, younger profile increases need for building
• Emerging middle-class, increasing consumerisation and access to

financial services e.g. banking, mortgages, credit

• Increasing demand for more and higher grades of cement as

urbanisation continues across the continent, demanding more infrastructure, housing and commercial building

Positive Long-Term Mega Trends

Source: Industry Sources, BMI. 1. Global average includes China.

• Unlocking of natural resources (oil, commodities)
• Increased manufacturing capabilities (for both domestic consumption

and exports)

• Increasing inward investment as aid is replaced by commercial funding
• Accelerating technological adoption, enabling ‘leap-frogging’
• In early build-out phase of development, cement is used in ‘economic

multipliers’ e.g. infrastructure, with positive feedback for cement demand

Supportive Growth Factors

• Historical SSA GDP growth of 4.6% between 2010 – 2014
• Expected SSA GDP growth of 4.2% between 2014 – 2018 (World Bank)
• Construction industry value forecast to grow at 6.5% CAGR

between 2015 – 2017

Attractive Macro Economic Situation Rapid Increase in Urbanisation Presents Strong Opportunity

408m 1,427m 634m 1,046m 1,041m 2,473m 2010 2050

Urban Rural Liberia Niger Ethiopia Mali Zimbabwe Sierra Leone Tanzania Senegal Kenya Nepal Cameroon Côte d’Ivoire Zambia Ghana

Laos

Congo

Palestine Pakistan

Nigeria 100 200 300 400 500 600 1,000 2,000 3,000 4,000 5,000 6,000

Global Average: 573kg(1)

Materially Lower Cement Consumption in Africa

GNI US$ Per-capita cement consumption (Kg)

Cement consumption in Africa has high and long-term growth potential

• Over 1.4B Africans are forecast to live in urban areas by 2050, which is

> 4x North America’s current population

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Strategic Raw Material Access

Location, quality and quantity of Dangote Cement’s limestone reserves is a key competitive advantage

• Limestone

is the key and irreplaceable ingredient

• f all types of modern cement
• Commercially viable deposits of limestone are relatively

scarce across many parts of Africa – Ideally need high-quality limestone to be near demand centres, fuel and distribution network

• Nigeria has a relative abundance of quality limestone

especially in key southern regions near to demand centres, export facilities – Nigeria also has good-quality coal that we will mine to achieve self-sufficiency in fuel

• Absence of limestone in much of West and East Africa,

especially coastal states, forces those countries to import bulk cement or its intermediate product, clinker, usually from Far East and Nigeria

• Limestone reserves close to existing facilities each with a

life of mine in excess of 30 years

• Dangote Cement plans an ‘export to import’ strategy to

serve West Africa and Cameroon from Nigerian factories, exporting by road and in time by sea

Limestone in Nigeria is high quality and close to demand centres

Goal Vision

Strategic Initiatives and Goals

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Grow and diversify across the last and potentially most attractive major growth market for cement

Strategic Pillars / Long-Term Goals Consolidate expansion across Africa Achieve leadership in key markets Tap high-value export markets Capture local markets with superior quality and service Adhere to global standards of governance Improve sustainability

Strive to obtain a #1 or #2 position in each market, with at least 30% share Serve landlocked markets with high sales prices and margins, generate FX to offset imported raw materials Serve markets with delivered product instead of factory gate sales; use financial strength to improve service, reduce costs Achieving international standing through good governance enables us to access global financial markets Be most energy and CO2 efficient company in our industry, with low environmental footprint when compared to peers

• Key elements of business model

– Target high-growth, populous markets with cement deficits and older/less efficient producers – Be the leader in quality, costs and service wherever we operate – Expand quickly and profitably when rivals are hampered by debt or smaller scale

A strategy to become a respected and world-class business leader

To deliver superior and sustainable risk-adjusted ROI, IRR on our investments To be Africa’s leading producer of cement, respected for the quality of its products and services and for the way it conducts its business

Value Creation

Size and buying power enables favourable procurement of plants at lower cost; brownfield increases returns Careful market selection looks for countries with good resources, cement deficit, ageing peers and investment incentives Larger scale of plants built with high degree of standardisation and prefabrication to reduce capex, improve returns New quarries enable

• ptimal mining of

highest quality raw materials, improving product quality Good emissions control helps environment, improves competitiveness in face of increasing industry regulation Strong focus on quality ensures best-quality materials, manufacturing processes and end products, reduces waste Fuel strategy improves margins by bulk procurement, switch to lower-cost kiln/power fuels e.g. coal Larger kiln sizes enables higher-efficiency production of clinker in most expensive step of production Use of modern vertical rolling mills enables finer cement grinding, improves quality with positive impact on setting time for block makers Highly automated packing and loading reduces manual loading, enables higher throughput through packing lines Ability to buy/operate trucks in bulk enables superior distribution capabilities, extends market reach

Strong competitive advantages delivering improved returns for shareholders

=

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Board and Committee Structure

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Board of Directors

Aliko Dangote (1) Onne van der Weijde Devakumar Edwin Sani Dangote Abdu Dantata Olakunle Alake Joseph Makoju Fidelis Madavo Douraid Zaghouani Olusegun Olusanya * Emmanual Ikazoboh* Ernest Ebi* Dorothy Ufot *

Finance & General Purpose Committee Olusegun Olusanya(1) Devakumar Edwin Sani Dangote Olakunle Alake Emmanuel Ikazoboh Ernest Ebi Fidelis Madavo Audit, Compliance & Risk Committee Ernest Ebi(1) Devakumar Edwin Olusegun Olusanya Sani Dangote Olakunle Alake Emmanuel Ikazoboh Fidelis Madavo Dorothy Ufot Remuneration & Governance Committee Emmanuel Ikazoboh Devakumar Edwin Sani Dangote Olusegun Olusanya Abdu Dantata Joseph Makoju Ernest Ebi Dorothy Ufot Nomination Committee Aliko Dangote(1) Olusegun Olusanya Emmanuel Ikazoboh Ernest Ebi Fidelis Madavo Technical Committee Fidelis Madavo(1) Devakumar Edwin Olakunle Alake Abdu Dantata Joseph Makoju Ernest Ebi Douraid Zaghouani Statutory Audit Committee(2) Robert Ade-Odiachi(1) Olakunle Alake Joseph Makoju Olusegun Olusanya Sada Ladan-Baki Bridget Shiedu

Note: * denotes Independent Non-Executive Directors. 1. Chairman of Committee. 2. The Statutory Audit Committee is not a Committee of the Board.

56 58 106 106 166 214 50 100 150 200 250 2010 2011 2012 2013 2014 2015

Annual Report Pages

Strong Corporate Governance

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• Achieved Premium Listing status on the Nigerian Stock Exchange, August 2015
• Followed rigorous audit of governance policies
• June 2016 appointment of first female director, Mrs Dorothy Ufot, SAN
• Adds strong legal knowledge
• Four Independent Non-Executive Directors
• Group-wide risk management initiative
• Improved Annual Report providing stakeholders with more information

and greater transparency

• Implementation of key policies to meet international standards of governance

International standards of governance EHSS commitments

• EHSS Head Massimo Bettanin appointed Q2 2016
• Formerly adviser to DCP during its work with ERM consultancy
• Major Environment, Health & Safety and Social initiative
• Standard approaches to be rolled out across all territories
• Occupational Health & Safety Management System
• Improves on plant-by-plant approach adopted so far
• Teams being recruited to Dangote Cement EHSS program in 2016
• Working to adopt IFC Performance Standards
• Will adopt NSE’s Sustainability Reporting guidelines when introduced,

probably for 2017 reporting year

• Likely to be based upon GRI G4 Sustainability reporting Guidelines
• Carbon disclosure likely from 2017

Improving corporate disclosure

Highlights for 9m 2016

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Financial results

• Revenue up 20.9% to ₦442.1B
• EBITDA down 16.3% to ₦178.4B at 40.4% margin, on lower

selling price, higher fuel costs in Nigeria and plants in ramp-up

• EPS down 17.0% to ₦8.13
• Net debt of ₦286.3B

Operational highlights

• Group cement volumes up 41.0% to nearly 18.4Mt
• Record sales volumes in Nigerian market,

up 28.1% to nearly 12.0Mt after Q3 2015 price reduction

• Pan Africa sales volumes up 72.9% to more than 6.4Mt
• Good start in Tanzania with strong market share gains
• Coal conversions completed at Ibese, Obajana
• Sierra Leone expected operational November
• Congo expected operational in mid-December

Regional revenues (₦B)

Nine months to 30th September 2016 2015 Change Nigeria 307.8 295.5 4.2% Pan Africa 136.6 70.1 94.9% Inter-company sales (2.3) (0.1) Total 442.1 365.5 20.9%

Regional sales volumes (‘000 tonnes) +45.4% +00.0%

5,000 10,000 15,000 20,000 9M 2015 9M 2016 Nigeria Pan Africa

Financial Overview

Nine months to 30th September 2016 2015 ₦B ₦B % change Comments Revenue 442.1 365.5% 20.9%

Maiden 9M contributions from non-Nigerian factories and improved revenue from Nigeria

Cost of sales (231.7) (138.7) 67.0%

Higher fuel costs in Nigeria owing to gas disruption

Gross profit 210.4 226.8 (7.3%) Gross margin 47.6% 62.0% EBITDA 178.4 213.2 (16.3%)

Lower selling price and higher fuel costs in Nigeria, plus impact of plants in ramp-up

EBITDA margin 40.4% 58.3% EBIT 122.4 173.5 (29.4%) EBIT margin 27.7% 47.5% Net finance income 26.4 (6.6)

Net gain of N00.0B on translation of net assets denominated in foreign currency

Profit before tax 148.7 167.0 (10.9%) Income tax (expense)/credit (15.2) (8.9) 70.3%

Effective tax rate is 10.2% at Group, 5% in Nigeria

Profit for the period 133.5 158.0 (15.5%) Earnings per share 8.13 9.80 (17.0%) 14 Income Statement

Financial Overview

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Kiln fuel (cement plant) 36% Power Plant 12% Limestone 0% Mine costs 2% Gypsum 4% Packaging 9% Refractories 1% Other variable 3% Maintenance 5% O&M contract 4% Direct wages 6% Plant general 6% SG&A 12%

% of average cash costs per tonne (Nigeria, 2016 ytd)

(cont’d)

Proportion of cash costs US$ based

Financial Overview

16 Movement in net debt Cash ₦B Debt ₦B Net debt ₦B As at 1st January 2016 40.8 (245.0) (204.2) Cash generated from operations before changes in working capital 182.9 182.9 Changes in working capital (26.7) (26.7) Income tax paid (0.7) (0.7) Capital expenditure (102.8) (102.8) Other investing activities (0.8) (0.8) Change in non-current prepayments 27.8 27.8 Net interest payments (24.2) (24.2) Net loans obtained (repaid) 99.2 (99.2) Other cash and non-cash movements 27.6 (29.0) (1.4) Dividend paid (136.3) (136.3) As at 30th September 2016 86.9 (373.2) 286.3

(cont’d)

17 As at As at 30/09/16 31/12/15 ₦B ₦B Property, plant and equipment 1,141.5 917.2 Other non-current assets 24.3 25.1 Intangible assets 4.3 2.6 Current assets 244.2 125.2 Cash and cash equivalents 86.9 40.8 Total Assets 1,501.2 1,110.9 Non-current liabilities 96.8 57.2 Current liabilities 282.8 164.1 Debt 373.2 255.6 Total liabilities 752.8 466.0 Net Assets 748.4 644.7 Net debt as % of net assets 38.3% 31.2%

Financial Overview

Balance sheet

(cont’d)

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Analysis of Debt

₦bn Short-term Long-term Total %

Naira 64.3 207.0 271.0 73% US$ 23.1 8.2 31.4 8% Rand 2.8 46.6 49.4 13% Other 10.2 11.1 21.3 6% Total 100.5 272.7 373.2 100%

• DCP has low US$ debt exposure
• BUT: DCP Nigeria lends funds to country operations in US$
• Results in gain on translation as Naira devalues

Nigeria Performance

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• Record 9M sales up 28.1% to nearly 12Mt
• Good growth in July/August but September

was c7% lower vs September 2015

– Breaks 11-month streak of growth from 10/15 to 8/16 – Impact of price increase announced in late August – Long Eid holiday in September, high September 2015 base

• Price increase of ₦650/bag implemented since August

to offset increased costs associated with devaluation

• Coal now available at all Ibese & Obajana lines

Nigeria performance

Nine months to 30th September 2016 2015 Change

Volumes sold (kt) 11,913 9,296 28.1% Revenue (₦B) 307.8 295.5 4.2% EBITDA* (₦B) 164.1 202.6 (19.0%) EBITDA margin 53.3% 68.6%

1,000 2,000 3,000 4,000 5,000 Q1 Q2 Q3 Q4 2014 2015 2016

Quarterly sales (‘000 tonnes)

+36.3% +45.4% * Excluding corporate costs and eliminations (see note 4 to accounts) +31.8% +8.0% $120 $130 $140 $150 $160 $170 $180 $190 $200 ₦ 1,000 ₦ 1,200 ₦ 1,400 ₦ 1,600 ₦ 1,800 ₦ 2,000 ₦ 2,200

Ex-factory price before discounts (excl. VAT)

₦/bag $/tonne

Fuel Costs in Nigeria

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• Kiln fuel is the major cost of cement production
• Group margins are affected by mix of fuel in Nigerian kilns
• Preference has previously been to run on gas, but:
• Disruption and maintenance have lead to shortages

since 2014, thus affecting margins

• Disruption has been significantly bad in 2016
• Back-up LPFO often not available locally, forcing

production shutdowns prior to use of coal (especially 2014)

• Gas priced in US$ but paid in Naira, so is affected by FX
• Locally mined coal is priced in Naira
• Switch to coal has several positive impacts
• Cheaper and more reliable than gas, thus improving margins
• Eliminates need for expensive LPFO as back-up
• Reduces FX need for imported fuel
• Could potentially run all lines 100% on local coal

at lower cost than gas

• DCP committed to disclosing CO2 emissions in line

with good practice and potential NSE requirements

+46% +47%

9M 2016

(9M 15)

Obajana Ibese Gas 45% (91%) 30% (85%) Coal 18% (5%) 49% (15%) LPFO 37% (3%) 21% (0%) Kiln fuel mix 9M 2016 Relative cost of alternative fuels vs gas per tonne of clinker Obajana Ibese Own-mined coal 0.7x 0.7x Locally bought coal 0.8x 0.8x Imported coal 1.2x 0.9x Gas 1.0x 1.0x LPFO 2.5x 1.8x

Good Progress with Coal Upgrades

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• Decided 2-3 years ago to diversify and de-risk fuel supplies
• Coal mills operational on all lines at Ibese and Obajana
• Immediate and positive impact on margins
• Already using locally purchased coal
• Blending with imported coal to assure optimal quality
• Source own coal from Ankpa, Kogi State, from Jan 2017
• Quality is good enough to use 100%, not blend
• Price and paid for in Naira
• Coal will transform profitability of Gboko (previously 100% LPFO)

+46% +47% Update on coal mills Obajana Capacity Operational date Line 1 2.5Mta June 2016 Line 2 2.5Mta July 2016 Line 3 5.0Mta December 2014 Line 4 3.0Mta October 2016 Ibese Capacity Operational date Line 1 3.0Mta September 2014 Line 2 3.0Mta October 2014 Line 3 3.0Mta September 2016 Line 4 3.0Mta September 2016 Gboko Capacity Operational date Line 1 2.0Mta September 2016 Line 2 2.0Mta October 2016

    

Ibese Obajana Mines Gboko

   

Pan Africa

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• Strong performance across the region despite

heavy seasonal rains, religious festivals in Q3

• Sales volumes up 72.9% to 6.4Mt
• Revenues rise 94.9% to ₦136.6B
• EBITDA up 27.9% to ₦22.9B
• Good sales increases across the region
• Strong market shares achieved across Africa
• Local disruption in Ethiopia affecting output from September
• Sierra Leone expected ready by November 2016
• Congo set for operations in mid-December 2016

9M sales ('000 tonnes)

3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 2015 2016

Rest of Africa performance

Nine months to 30th September 2016 2015 Change

Volumes sold (kt) 6,450 3,731 72.9% Revenue (₦B) 136.6 70.1 94.9% EBITDA* (₦B) 22.9 17.9 27.9% EBITDA margin 16.8% 25.7%

* Excluding corporate costs and eliminations (see note 4 to accounts)

Country Updates

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Cameroon

• GDP growing at c5% but slowing on lower oil price
• Infrastructure investment continues but at more

modest levels

• Cement pricing generally stable, $114 at

September

• Our sales volumes were 0.8Mt

Ghana

• 0.8Mt cement sold, including imports from Nigeria
• Importing from Nigeria provides non-duty

alternative to imports from outside ECOWAS

• Improved supply and logistics enabled us to

increase market share to 15% on improved sales

• 1,000 trucks to bring cement from Nigeria,

improving local delivery capability

• Pricing supportive at about $113 in September

Ethiopia

• Local political disruption reduced output in

September/October

• Price increased to $95 as a result of disruption
• 1.4Mt cement sold to September 2016

Senegal

• Economy slowing because of lack of key export

goods, but government has approved $370m infrastructure investment for roads and power

• Strong sales despite maintenance downtime
• Achieving 29% market share
• Increasing export sales to Mali, also targeting

Gambia and Liberia for bulk cement

• Typical ex-factory price was $76 in September

Country Updates

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South Africa

• Economy weak on China slowdown, Brexit worries
• But infrastructure investment set to rise
• Strong sales despite economy
• Pricing pressure on competition, new capacity

Tanzania

• Govt has ambitious plans for medium-term growth

but climate is subdued at present following VAT increases

• Infrastructure and housing drive cement demand
• Price competition and new DCP capacity has driven

prices down to about $80

• Solid start to operations at Mtwara, quickly

becoming a leading supplier across Tanzania

• Reliance on diesel gensets will subdue margins until

coal-fired power plant is completed Zambia

• Low copper prices impact export earnings,

Kwacha depreciation vs US$

• Increased unemployment, 20% inflation, power

shortages

• Infrastructure stalling, limited new projects,

but confidence returning after election

• Despite inflation, cement prices under pressure

$80/tonne in September

• Dangote Cement achieves 40%-45% share in first

year

Update on Trading and Outlook for 2016

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• Q4 margin improvements expected from:
• Impact of Nigeria price adjustment in September
• Elimination of LPFO from fuel mix
• All Nigeria lines now running gas/and or coal, eliminating use of LPFO

with immediate benefits to Q4 margins

• Own-mined coal expected in January 2017, further improving margins
• Mined by Dangote Industries
• Improves fuel security, reducing dependence on erratic gas supply
• Will enhance margins, as cheaper than gas, imported coal (at Obajana), LPFO
• Priced in Naira, reducing need for FX on major cost line
• Could be self-sufficient in fuel when mining is underway
• Nigeria volumes expected lower in Q4
• Compared to high base of Q4 2015
• New capacity expected soon
• November: Sierra Leone (0.7Mta)
• Mid-December: Congo (1.5Mta)

+46% +47%

$120 $130 $140 $150 $160 $170 $180 $190 $200 ₦ 1,000 ₦ 1,200 ₦ 1,400 ₦ 1,600 ₦ 1,800 ₦ 2,000 ₦ 2,200 Jan-14 Feb-14 Nov-14 Dec-14 Feb-15 Mar-15 May-15 Sep-15 Oct-15 May-16 June-16 Aug-16 Sep-16

Ex-factory price before discounts (excl. VAT)

₦/bag

Investor Relations

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For further information contact: Carl Franklin Head of Investor Relations Dangote Cement Plc +44 207 399 3070 +44-7713 634 834 carl.franklin@dangote.com www.dangotecement.com @DangoteCement