Cement Manufacturers Report Record N970.2bn Cost of Sales on Inflation, FX Crisis

Kayode Tokede

Following galloping inflation rate and the devaluation of the naira at the foreign exchange market, leading cement makers, Dangote Cement Plc, Lafarge Africa Plc, BUA Cement Plc, reported a whopping N970.2billion cost of sales in nine months of 2023, representing an increase of 27.4 per cent from N761.74 billion in nine months of 2022.

The National Bureau of Statistics (NBS) had disclosed that the average retail price of Automotive Gas Oil or Diesel paid by consumers increased by 12.77 per cent on a year-on-year (YoY) basis from a lower cost of N789.90 per litre recorded in the corresponding month of last year to a higher cost of N890.80 per litre in September 2023.

The bureau also revealed that inflation rate that moved to 26.72 per cent as of September 2023 from 20.77 per cent September 2022 and deprecation of Naira at the foreign exchange market to N768.76 /Dollar as at September 2023 from N432.37/Dollar September 2022 negatively affected these companies’ performance in the period under review.

Despite the challenges, the three cement makers generated N551.79billion profit before tax in nine months of 2023, a growth of 15.3 per cent from N478.66 billion reported in nine months of 2022.

Speaking on cement manufacturers position, the Vice Chairman, Highcap Securities Limited, Mr. David Adnori expressed that the business environment was challenging for companies operating in Nigeria, stating that inflation rate, among other factors, reduced  profit generation.

Despite the challenges, Adnori said cement producers in nine months of 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.

Meanwhile, analysis of the cement markers unaudited result and accounts for the third quarter ended September 30, 2023, showed that Dangote Cement recorded N642.74 billion cost of production in nine months of 2023, an increase of 33 per cent from N483.83billion in nine months of 2022.

Fuel & power alone consumed N255.26billion in nine months of 2023   from N195.2billion in nine months of 2022, while materials consumption increased to N169.91billion in nine months of 2023 from N144.9billion in nine months of 2022.

Dangote Cement’s net exchange loss on foreign denominated transactions, hike in production cost of sales, finance cost and selling and distribution expenses impacted the company’s PBT as the combined four indicators hits N1.16 tillion in nine months of 2023 from N873.67 billion in nine months of 2022.

Dangote Cement, however, reported N404.89 billion profit before in nine months of 2023, a growth of 21 per cent from N335.9billion reported in nine months of 2022.

The Chief Executive Officer of the comapany, Arvind Pathak, in a statement said “This positive nine months result is a combination of our strong value proposition, improved operational efficiency and a sustained drive to contain cost amidst an accelerating inflationary environment.

“We achieved double-digit growth in Group revenue at N1.51trillion, while EBITDA rose to an all-time high of N662.8billion, up 28.5 per cent. Again, we continue to show the strength in the diversity of our operations. Our pan-African operations generated a record revenue and EBITDA growth of 103.9 per cent and 255.4 per cent, respectively, contributing 41.9 per cent to Group volumes.

“This unprecedented growth was driven by sustained demand across our countries of operation. We will continue to explore emerging opportunities and export strategies around the region to further consolidate the Group performance, “Pathak said.

Pathak concluded, “Looking ahead, we are at the final stage in the completion of our 1.5Mta grinding plant in Cote d’Ivoire, having commissioned our 0.45Mta Takoradi plant in the first half of the year. We are focused on improving our value proposition, anchored on our promise to deliver strong and superior cement to our unwavering customers. I am very pleased with the direction of our business and confident we will finish the year strong.”

As BUA Cement declared N186.44 billion cost of production in nine months of 2023, an increase of 31 per cent from N142.83billion in nine months of 2022, Lafarge Africa           cost of sales moved from N135.08 billion in nine months of 2022 to N141.02 billion in nine months of 2022.

BUA Cement, thus reported N85.75 billion profit before tax result and accounts for nine months ended September 30, 2023, a decline of 3.4 per cent from N88.81billion reported in nine months of 2022.

The decline in PBT can be attributable to N26.9 billion net exchange loss in nine months of 2023 from N5.26 billion in nine months of 2022.

Analysts have expressed that with the company’s revenue is expected to grow significantly in 2024 following plant expansions at Obu and Sokoto, which will be commissioned during the first quarter (Q1) 2024.

The company started that once the plants are commissioned, it will bring the total installed capacity to 17 million metric tonnes per annum (mmtpa) from 11 mmtpa.

Speaking recently to shareholders at the company’s 7th Annual General Meeting (AGM), Chairman, Board of Directors, BUA Cement, Abdul Samad Rabiu, said, “As a Company, we remain focused on our strategies, primarily market consolidation as there is no market across the country where our presence is non-existent.

“We, eagerly and excitedly so, await the completion of the Lines 3 and 5 at Obu and Sokoto during the first quarter of 2024. This would enable us provide more quantities of cement to the domestic market and particularly increase our market share across the African continent.”

For Lafarge Cement, CEO Lafarge Africa, Lolu Alade-Akinyemi in a statement said, “The fundamentals of the business remain strong.

‘We achieved strong top-line growth of 9.8 per cent and 7.1per cent in third quarter and nine months, respectively. Nine months Operating Profit grew 22.6 per cent. Our Q3 performance was however impacted by macro-economic challenges mostly inflation and Naira devaluation.

“We continue to maintain a strong free cash flow position and a healthy balance sheet, positioning us for sustainable growth. Our mid to long term outlook remains positive. We are committed to delivering sustainable value to all stakeholders as we go into the last quarter of the year. I would like to thank all employees and stakeholders of Lafarge Africa for their support over the years and in the last quarter’’