H1: Lafarge, BUA, Dangote Cement’s PBT Slide to N379.71bn on FX Loss, OPEX

Kayode Tokede

Cement manufacturing companies, Dangote Cement Plc, BUA Cement Plc and Lafarge Africa Plc, saw a cut in profit before tax to N379.71 billion in half year (H1) ended June 30, 2024 on the back of rising foreign exchange loss and hike in operating expenses (OPEX).

However, the three cement manufacturing giants’ profit before tax grew by 2.2 per cent when compared to N371.6 billion in H1 2023.

THISDAY analysis of the three firms’ results for the period showed that Dangote Cement emerged most profitable cement manufacturing company, generating N292.96 billion PBT in H1 2024, about 22 per cent increase from N239.86billiion in H1 2023.

Foreign Exchange loss and operating expenses impacted negatively on BUA Cement and Lafarge Africa’s PBT in H1 2024.  

While BUA Cement reported N40.13 billion PBT, about 47 per cent decline from N76.42billion in H1 2023, Lafarge Africa declared N46.63 billion PBT in H1 2024, representing 15.7 per cent decline from N55.32 billion reported inn H1 2023.

The likes of BUA Cement was faced with N39.98 billion foreign exchange loss in H1 2024 from N2.1 billion in H1 2023, while Lafarge Africa declared N19.91 billion foreign exchange loss in H1 2024.

Despite growing revenue driven by hike in price of cement product, these companies felt the impact of rising cost of sales, operating expenses and foreign exchange loss in the period under review that weaken profit and threatened shareholders return in 2024 full financial year.

For instance, Dangote Cement with about 85 per cent increase in revenue to N1.76 trillion closed the period under review with N1.24 trillion cost of sales and operating expenses, an increase of 113 per cent from N581.8 billion reported in the corresponding period. 

Also, BUA Cement reported N282 billion cost of sales and operating expenses, representing 109 per cent from N135.11 billion in H1 2023 while Lafarge Africa declared N218.35billion cost of sales and operating expenses in H1 2024, about 50 per cent increase from N145.81billion reported in H1 2023.

In the period under review Naira depreciated to N1,482.982 against the dollar as of June 2024, from N770.38 against the dollar June 2023, while inflation rate stood at 34.19 per cent June 2024 from 22.79  per cent June 2023.

Analysts stated that despite facing significant economic challenges such as elevated inflation, a depreciating exchange rate, and ongoing security concerns, the companies have been resilient over the years.

In a recent report, analysts at CardinalStone stated, “In 2024, the Nigerian cement industry is expected to benefit from renewed government focus on infrastructure development and construction projects, which could stimulate demand for cement products.

“With increased budget allocations to critical sectors and ambitious infrastructure initiatives (N1.32 trillion to infrastructure, which represents five per cent of the total FG 2024 budget), the construction industry is likely to experience a resurgence.

“Cement manufacturers, in response, are beginning to recalibrate their production strategies in the form of capacity expansion and improved efficiency to meet the anticipated rise in demand. While challenges may persist, the outlook for Nigeria’s cement industry in 2024 is one of cautious optimism, with potential growth opportunities emerging amidst the recovery phase, “the report said.

The Chief Executive Officer, Dangote Cement, Arvind Pathak in a statement said: “We effectively navigated macroeconomic headwinds to deliver positive results in the first half of the year. Group volumes were up 3.8per cent, with our Nigeria operations achieving double-digit volume growth of 10.9per cent.

“This growth was driven by improved efficiency across our operations and supported by increased market activity levels compared to the election year and cash crunch in 2023. Despite the challenges of elevated inflation, high borrowing cost and a further weakening of the currency in the first six months of the year, our business demonstrated strong resilience. This was due to our rigorous focus on cost minimisation and our diversified business model.

“Group revenue and EBITDA rose 85.1per cent and 50.3per cent to N1,760.1B and N666.2B, respectively. Our PAT reached N1,89.9 billion, marking a 6.3per cent increase. I am pleased with the performance of our business, as key financial indicators are showing positive trends. By leveraging our robust export-to-import strategy, Dangote Cement completed 14 shipments of clinker from Nigeria to Ghana and Cameroon. This effort resulted in a 55.2per cent surge in our Nigerian exports, underscoring our commitment to fostering African self-sufficiency.”

Looking ahead, he added, “we remain bullish about the growth prospect of the African region, evident in our increased capital investments. We continue to prioritise innovation, cleaner energy transition, and cost leadership towards achieving our vision of transforming Africa and building a sustainable future.”

The CEO of Lafarge Africa, Lolu Alade-Akinyemi in a statement said, “We sustained Net sales growth in Q2 2024 but saw H1 2024 PAT decline 17.3per cent vs PY due to foreign exchange losses resulting from Naira devaluation in H1 2024. Our strategic and cost management initiatives have contributed to improved results despite severe macroeconomic challenges.

“We remain steadfast in our resolve to drive innovation and accelerate green growth in line with our sustainability ambitions while also delivering value to our stakeholders. I would like to thank our esteemed customers, employees and all other stakeholders of Lafarge Africa for their commitment despite the macroeconomic headwinds being experienced in the industry.”

He added, “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 in 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.”