Cement Manufacturers’ Profit Wilts on OPEX, Cost of Sales

Kayode Tokede

A total of three cement-producing companies in Nigeria struggled with the high cost of sales and foreign exchange losses to generate marginal 2.5 per cent increase in profit to N277.7billion in half year (H1) ended June 30, 2023 as against N270.88billion generated in half year ended June 30, 2022.

Amid double-digit inflation rate, the likes of Dangote Cement Plc, Lafarge Africa Plc, and BUA Cement Plc reported a significant increase in cost of sales and operating expenses that weakened profit before tax and profit after tax.

In the half year under review, Lafarge Africa reported N35.48 billion profit after tax, a decline of 5.16 per cent from N37.41billion, while Dangote Cement reported N178.6billion profit after tax, a growth of nearly 4 per cent from N172.1billion reported in corresponding period of 2022.

On its part, BUA Cement declared N63.62billion profit after tax in H1 2023, an increase of 2.5 per cent from N270.88billion reported in H1 2022. 

The combined three companies reported N592.32 billion Cost of Sales (CoS) in H1 2023, an increase of 16 per cent from N510.48 billion in H1 2022, while total operating expenses stood at N270.4 billion in H1 2023, an increase of 17.2per cent from N230.69 billion reported in H1 2022.

On significant increase in operating expenses, Dangote Cement show its profit before tax dropping to N239.86billion in H1 2023, a drop of 9.4 per cent from N264.89billion reported in H1 2022.

BUA Cement managed to generate N76.42billion profit before tax in H1 2023, a 2.75 per cent growth from N74.37billion in H1 2022. 

In addition, Lafarge Africa announced N55.32billion profit before tax in H1 2023, a growth of 18 per cent from N46.88billion reported in H1 2022.

Further analysis of the companies’ H1  2023 results revealed that Dangote Cement generated N950.8 billion revenue, 17.67 per cent increase from N808.04billion in H1 2022.

Coming close to Dangote cement in revenue generation is BUA Cement with N221.07billion in H1 2023, a growth off 17.24 per cent from N188.56billion in H1 2022.

Lafarge Africa grew its revenue to N197.68billion in H1 2023, about six per cent increase from N186.6billion reported in H1 2022. 

Experts expressed that the business environment was challenging for companies operating in Nigeria, stating that inflation rate, among other factors impacted on profit generation.

According to the Vice Chairman, Highcap Securities Limited, Mr. David Adnori Adnori, cement producers in H1 2023 benefited from the ongoing construction of infrastructure projects, like rail and roads by the federal government and the demand for housing infrastructure by the private sector.

The CEO, Lafarge Africa, Lolu Alade-Akinyemi in a statement said, “I would like to thank all employees and stakeholders of Lafarge Africa for another quarter of strong results, despite the challenging economic environment. We remain focused on delivering sustainable value to all stakeholders as the market recovers for the rest of the year.

“We achieved strong top-line growth of 10.3per cent in Q2 and 5.9per cent in H1; Operating Profit growth of 13.3per cent in Q2 and 7.7per cent in H1, and Profit Before Tax improvement of 29per cent in Q2 and 18per cent in H1. Owing to the expiration of the Pioneer Status Incentive, Q2 Profit After Tax growth was a muted 3.2per cent. This is backed up by a strong Free Cash Flow position and healthy Balance Sheet.

“The recent launch of our Eco label cement brand re-affirms our commitment to delivering superior value to our customers. This new product has been certified to be eco-friendly with 30per cent lower carbon emission than the local industrial standard. Our strategic and cost management initiatives have contributed to improved results despite the challenges. We remain steadfast in our commitment to driving innovation and accelerating green growth in line with our sustainability ambitions and targets.”

Akinyemi, on outlook said, “The Nigerian Infrastructure and Construction Sector is expected to continue to grow despite inflationary pressure on purchasing power. As a result, we maintain our positive outlook, with market recovery expected for the second half of the year.

“We will continue to maximize volume opportunities across our markets and actively manage our costs. The company remains committed to its sustainability ambitions and strategy of ‘Accelerating Green Growth’ through innovative building solutions and delivery of stakeholder value.”