Lafarge, BUA, Dangote Cement PBT Lags at N712.47bn on Cost of Sales, OPEX

.firms records N1.04trn CoS .Dangote Cement spent N266.49bn on energy

Kayode Tokede

Due to the challenging business environment, three cement manufacturing companies, Dangote Cement Plc, Lafarge Africa Plc and BUA Cement Plc struggled to report robust profit, attributable to a significant increase in cost of sales, operating expenses and finance cost in 2022 financial year.

Analysis of the companies’ 2022 results (profit & loss figures) revealed the three companies reported a whopping sum of N1.04 trillion cost of sales, an increase of 24 per cent from N837.9 billion in 2021.

Dangote Cement, with subsidiaries in other African countries reported N662.89 billion cost of sales in 2022 from N551.02 billion in 2021, while BUA Cement announced N197.94 billion cost of sales in 2022 from   N136.39 billion in 2021.

For Lafarge Africa, it announced N177.02billion cost of sales in 2022, an increase if 18 per cent from N150.51billion reported in 2021.

As the average retail price of Automotive Gas Oil (Diesel) paid by consumers in December 2022 was at N817.86 per litre, an increase of 182.64 per cent from N289.37 per litre recorded in the corresponding month of 2021, Dangote Cement spent N266.49 billion on fuel & power consumed in 2022 from N196.63 billion reported in 2021.

Also, Lafarge Africa reported N64.14billion on fuel consumption in 2022 from N30.30billion in 2021.

Consequently, the three companies reported N712.47 billion profit before tax in 2022, representing a marginal growth of 1.34 per cent from N703.03 billion reported in 2021.

Further analysis of the companies’ 2022 results revealed that Dangote Cement reported N524.01 billion profit before tax in 2022, a decline of 2.66 per cent from N538.4billion in 2021, while BUA Cement profit before tax stood at N120.15 billion in 2022, an increase of 17 per cent from N102.87 billion reported in 2021.

In addition, Lafarge Africa announced N68.31billion profit before tax in 2022, a growth of 10.6 per cent from N61.8billion declared in 2021.

As total operating expenses of Dangote Cement, two others stood at N523.38billion in 2022, representing an increase of 48 per cent from N353.49billion in 2021, Finance cost grew significantly by 116 per cent to N156.91billion in 2022 from N72.69billion in 2021.

According to THISDAY investigation, the three companies were faced with hike in cost of raw materials, cost of purchasing diesel, among others as inflation rate mounted in the year under review.

The Nigeria economy was also faced with naira devaluation that impacted on foreign exchange loss, as Naira depreciated from N424.1/1$ at the end of 2021 to N461.1/1$ at the end of 2022.

Reacting, the management of Dangote Cement stated that it experienced a surge in prices of our inputs costs; significant foreign exchange fluctuation in our countries of operation; and a drop in gas availability in Nigeria.

“However, we proactively implemented a robust cost reduction strategy and a performance improvement plan across the Group. These initiatives enabled us manage our cost efficiently, while also tracking performance across all departments,” the leading cement company said in a statement obtained by THISDAY.

The company added that, “In total, manufacturing costs increased by 20.3per cent to N662.9billion from N551.0billion in 2021. Materials consumed increase by 12.1per cent to N196.5billion, despite the reduction in production volume owing to inflationary pressures.

“Fuel & power consumed increased by 35.5per cent to N266.5billion due to increasing energy costs especially AGO and coal. The increase in Nigeria’s manufacturing costs was mainly driven by increased plant maintenance cost, rising energy costs and increase in price of gas which is pegged to the USD.”
The CEO of Lafarge Africa, Khaled El Dokani in a statement stated that the worsening exchange rate situation led to revaluation losses, thereby constraining net Income growth to 5.2per cent.

Further findings revealed that Dangote Cement still maintained leader in revenue generation, followed by BUA Cement Plc.

The compaany reported N1.62 trillion revenue in 2022, an increase of 17 per cent from N1.38 trillion in 2021 while BUA Cement grew its revenue to N360.99 billion in 2022, an increase of 40.3 per cent from N257.33 billion in 2021.

Lafarge Africa on its part reported N373.24 billion revenue in 2022 from N293.09 billion in 2021.

Meanwhile, analysts believe the business environment was challenging for companies operating in Nigeria last year, stating that inflation rate, among other factors impacted on profit generation.

The Vice Chairman, Highcap Securities Limited, Mr. David Adnori said cement producers in 2022 benefited from the ongoing construction of infractrucure projects, like rail and roads by the Federal Government and the demand for housing infrastructure by the private sector.

Also, analysts at Vetiva Research stated that raw input costs have remained elevated, driven by persistent FX challenges and rising inflationary pressures.
Vetiva Research in a report titled, “Nigeria H2’22 Outlook A strange labyrinth,” said the upward impact of the ongoing Russian-Ukraine crisis on energy prices has caused an increase in diesel and gas prices, which has emerged as a major threat to profitability.

“To combat these rising cost lines, cement players like Dangote Cement, through its Alternative Fuel Project, and Lafarge Africa, through its subsidiary Geocycle, are tilting towards alternative fuels like biomass for cement production in their plants.

“Most of the components of the biomass fuel are locally sourced, reducing their dependence on imported and costly energy sources. Consequently, input cost worries moderated, thereby improving profitability margins.”

The firm had projected that cost pressures and foreign exchange liquidity issues to persist throughout 2022 and this may dampen the anticipated price stability as industry players may have to pass the increased cost to consumers.

“Also, the recent hike in interest rates by the CBN will make borrowings more expensive and may weigh on investments in the real estate sector. Although the rising interest rate may affect demand, the ongoing construction activities by the public and private sectors would support cement demand through the remainder of the year,” the analysts added.