Cement makers in Nigeria are struggling to sustain their cash flows due to rising interest rates, inflation and naira devaluation, which have directly impacted their loans and borrowings.
The cement makers examined are: BUA Cement, Dangote Cement, and Lafarge Africa
These companies have negative cumulative cash flows used in financing activities of N846 billion in the nine months of 2024, a 131.1 percent decline from an aggregate of negative N366.5 billion in the nine months of last year.
A negative net cash flow used in financing activities can mean the company is servicing debt, but can also mean the company is retiring debt or making dividend payments and stock repurchases, while a positive net cash flow used in financing activities means more money is flowing into the company than flowing out, which increases the company’s assets.
Cash flow from financing activities (CFF) is a section of a company’s cash flow statement that shows the net cash flows used to fund the company’s operations. This line item provides investors with insights into the company’s financial strength and the effectiveness of its capital structure management.
Read also: FMN swings to N14.4bn profit on investment income
Dangote Cement
Dangote Cement, a cement manufacturing company in its recently released nine-month financial statement, reported negative cash flow from financing activities of N686.6 billion from a negative of N347.9 billion.
The decline and negative figures were primarily due to loan repayments totaling N1 trillion, with interest and dividends paid of N177 billion and N502 billion, respectively.
The cement maker reported borrowings worth N1.58 trillion from N892.9 billion. Finance costs recorded by the company surged by 137.3 percent to N451 billion from N190 billion.
BUA Cement
BUA Cement reported negative cash flow from financing activities amounting to N89.3 billion in the 9M of 2024. Data from its financial statement available on the Nigeria Exchange Group show that the company reported a positive N17.1 billion in the same period last year.
The cement manufacturer’s reduced cash outflow from financing activities resulted from N93 billion spent on loan repayments and N67 billion paid as dividends to its equity shareholders.
Data also show that the company’s total borrowings during the period rose to N609 billion, up 136 percent from N258 billion. Finance costs recorded in the period increased by 150.7 percent to N17.3 billion from N6.9 billion.
Lafarge Africa Plc
Lafarge Africa, a member of the Holcim Group cash flow from financing activities to negative N70.1 billion from negative N35.7 billion. Its only cash inflow derived from financing activities was generated from proceeds from borrowings which amounted to N685 million.
The cash outflows for the building solutions company included N25.4 billion for the repayment of borrowings, N1.13 billion for the payment of lease liabilities, and N13.5 billion for interest payments. As a result, the company’s borrowings decreased from N39.3 billion to N1.5 billion, while its finance costs increased significantly, rising from N2.1 billion to N15.1 billion.
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