Aliko Dangote increases his wealth even further

With assets worth USD 18.3 billion, Nigerian entrepreneur Aliko Dangote is Africa’s richest man and is even wealthier than some other prominent businessmen. Investors in his empire are also profiting from his wealth, as we explain in this week’s column.

Capital News Africa: From the trading floor – Week 46-2022

This column deals with an extraordinary man who is very well known on the African continent but perhaps less so outside of it. We are talking about 65-year-old Aliko Dangote, one of Africa’s richest and most successful entrepreneurs ever.

Despite the difficult world economy of late, Dangote has become even richer. This is due mostly to this year’s surge in the oil price, which certainly benefits him, but also the Nigerian economy generally. According to the Bloomberg Billionaires Index, Dangote’s assets now total USD 18.3 billion.

Wealthier than the CEO of Binance

Indeed, Dangote is even a bit wealthier than the Chinese-Canadian crypto entrepreneur Changpeng Zhao. Zhao’s assets are said to total USD 18.2 billion thanks to his 86% stake in Binance, the trading platform for cryptocurrencies. While that is very impressive, Zhao’s wealth has shrunk due to the decline in the value of cryptocurrencies like Bitcoin. At the start of the year, Bloomberg put Zhao’s assets at USD 77 billion.

Dangote’s wealth, on the other hand, comes from sturdier business. One example is building materials maker Dangote Cement (ISIN: NGDANGCEM008) which Dangote himself founded and in which he still holds an 85% stake in. With a market cap of EUR 8.8 billion, Dangote Cement is the most valued stock on the Nigerian Stock Exchange (NGX) in Lagos.

Dangote Cement has also been affected by the severe market correction that has taken place since the start of the year. In the last six months, for example, its share has lost 20% of its value to trade at NGN 238.50 (EUR 0.5226). Although the share has bounced back a bit recently, it is still down a net 7.2% since January.

Successful pan-African strategy

On the other hand, Dangote Cement is still keeping its long-term investors happy. In the last three years, its share has gained an impressive 64.5%. One reason for this is the company’s internationalisation of its business. At first, Dangote Cement’s management did not see the wisdom of expansion due to its predominant position in Nigeria.

However, it later decided to build cement factories in a host of African countries, including Cameroon, Congo, Ghana, Senegal, Tanzania, Sierra Leone, South Africa, Zambia and Ethiopia. This extensive foreign business now accounts for 28.7% of Dangote Cement’s total sales of EUR 3.6 billion. Quite a success story.

Other holdings in Aliko Dangote’s empire include Dangote Sugar Refinery (ISIN: NGDANSUGAR02) with a market cap of EUR 434 million and Dangote Flour Mills (ISIN: NGDANGFLOUR2). But investors curious about these two companies should be aware that they are characterised by rare trading of their shares and a lack of liquidity.

Excellent French managers at the top

That Aliko Dangote has picked the right businesses to build up is clear. But it takes more than just building a business to really be successful. One also has to manage it effectively.

It is also here that Dangote has shown his prowess - namely in picking the right people to manage his companies. For example, Michel Puchercos, CEO of Dangote Cement, is a graduate of two elite French technical schools, including Ecole Polytechnique and Ecole Nationale du Génie Rural, des Eaux et des Forêts. Prior to joining Dangote, Puchercos had more than 20 years experience in the building sector and was the former African boss for Lafarge, Dangote Cement’s biggest competitor based in France.

Profits slide in the first nine months of 2022

Dangote Cement’s fortunes can be measured by its last earnings disclosure. At the end of October, the company said sales in the first nine months of 2022 totalled NGN 369 billion (EUR 808 million), up 11.3% from one year ago. However, it also said net profit declined 54.5% to NGN 38.9 billion (EUR 85.2 million) in the period.

Still, analysts are still very bullish on Dangote Cement’s share, having set a price target of NGN 327, which is significantly above its current market price of NGN 238.50. This explains why its share has recovered somewhat.

Fundamentally speaking, it’s easy to see why analysts are upbeat about Dangote Cement’s prospects. The company sports a sales margin of 42.1% and a profit margin of 26.1%. Its dividend yield totals 7.8%, and the price-to-earnings ratio for the share is a relatively low 12.1.