Cement Producers Groan as Cost of Production, OPEX Jumped to N824.3bn in Q1

Kayode Tokede

Following astronomical inflation rate in Nigeria, cement producing companies are struggling to stay in business as just the to three producers declared a whooping N824.3 billion cost of production and Operating Expenses (OPEX) in the first quarter (Q1) ended March 31, 2024.

This is a significant increase of 112 per cent from N388.8 billion declared in the first quarter ended March 2023. 

The three companies are;  Dangote Cement Plc, BUA Cement Plc and Lafarge Africa Plc.

Inflation rate in Nigeria increased to 33.20 per cent in March compared to 22.04 per cent according to a report by the National Bureau of Statistics (NBS) in March 2023.

At 33.20 per cent, the inflation rate in Nigeria hits the highest peak since March 1996. The high inflation is mainly driven by the sharp fall in Naira coupled with the removal of fuel subsidy.

The local currency closed March 2024 at N1330.26 against the dollar at the official rate compared to N460.35 against the dollar March 2023.

Analysis of the companies’ Q1 results showed that Dangote Cement reported N398.16 billion cost of production in Q1 2024, a growth of 143.3 per cent from N163.67billion in Q1 2023, while its OPEX hits N190.79billion in Q1 2024, about 118 per cent growth from N87.39billion declared in Q1 2023.

For BUA Cement, the company declared N116.19billion cost of production in Q1 2024, representing 108 per cent from N55.98billion reported in Q1 2023 as its OPEX stood at N11.51billion in Q1 2024, a decline of 4.4 per cent from N12.03billion declared in Q1 2023.

In addition, Lafarge Africa announced N72.13billion in Q1 2024 cost of production, 59 per cent growth from N45.34biillion in Q1 2023, as its OPEX rise to N35.53billion in Q1 2024, a growth of 45 per cent from N24.43billion in Q1 2023.  

Cement makers in Nigeria have been at the receiving end of the deteriorating Nigerian economy, which has pushed up costs production amid modest purchasing power.

Manufacturing companies in Nigeria are faced with power shortages, weak local raw materials, insecurity and a poor state of infrastructure.

Increasing operational costs have been at the heart of the rising price of cement, which revved up abysmally in first three months of 2024, forcing the stoppage of several construction works.

Currently, the price of cement hovers around N9,000 and N15,000 per bag in some major cities in country.

Specifically, Dangote Cement benefited from the hike in price of cement as its revenue closed Q1 2024 at N817.35 billion, representing 101 per cent increase from N406.72billion reported in Q1 2023.

On its part, BUA Cement declared N161.13 billion revenue in Q1 2024, a growth of 52 per cent from N106.35 billion in Q1 2023 while Lafarge Africa announced N137.77 billion revenue in Q1 2024, about 50 per cent from N91.8billion reported in Q1 2023.

Amid hike in cost of production, OPEX, and N10.06 billion foreign exchange loss, BUA Cement declared N21.29 billion profit before tax in Q1 2024, a decline of nearly 40 per cent from N35.46billion reported in Q1 2023.

Also, Lafarge Africa announced N8.71 billion profit before tax in Q1 2024, a decline of per cent from N22.48billion reported in Q1 2023, attributable to N21.8 billion net foreign exchange loss.

Commenting, the CEO, Lafarge Africa, Lolu Alade-Akinyemi stated, “foreign exchange losses was due to further Naira devaluation in the quarter, resulted in a PAT decline of 65 per cent. In spite of the challenging macroeconomic environment, we continue to focus on delivering sustainable value for all our stakeholders, positioning us for sustainable growth over the medium to long term.”

Dangote Cement is the only company that declared impressive growth in profit before tax in the period under review.

The company announced N166.4 billion profit before tax in Q1 2024, a growth of 13 per cent from N146.8billion in Q1 2023. 

The CEO, Dangote Cement, Arvind Pathak in a statement said: “Driven by an uptick in economic activities, our Nigerian operations witnessed a strong rebound, with volumes up 26.1per cent to 4.6Mt in the quarter.  Similarly, our pan-Africa operations continued an upward trajectory, with volumes up 3.1per cent to 2.7Mt, buoyed by increased sales in Zambia and Congo.

“Despite elevated cost pressures, increased borrowing costs, and a further currency weakening, our first-quarter results reflect our commitment to navigating challenges effectively. Group revenue more than doubled to N817.4 billion, while Group EBITDA rose 66.6per cent to N309.5billion. PAT was up 2.9per cent at N112.7billion. These results underscore our ability to adapt and thrive in a dynamic business environment while delivering value to our stakeholders.

During the quarter, we intensified our emphasis on exports, dispatching 7 ships from Nigeria to Ghana and Cameroon. As a result, our Nigerian exports surged by 87.2per cent, reflecting our commitment to expanding our presence in regional markets and capitalising on our export-to-import strategy. We continue to prioritise innovation, cleaner energy transition, and cost leadership towards achieving our vision of transforming Africa and building a sustainable future.”