Cement makers spend N205bn on energy bills in H1

Cement makers have spent N204.93 billion on energy costs in the first half of 2023, up 18 percent from N173.54 billion in a similar period in 2022.

In Africa’s biggest economy, cement manufacturers mostly self-generate their own power as the country’s national power grid infrastructure does not generate enough stable power to meet their needs.

Data gleaned from the firm’s latest financial statement showed Dangote Cement’s energy cost grew by 21 percent to N157.02 billion in the first six months of 2023 while BUA Cement’s energy cost grew 10 percent to N47.91 billion in the first half of 2023.

Lafarge Africa didn’t outline energy costs but its production fixed costs which include personnel expenses, by-products costs, and electrical energy expenses increased to N13.55 billion in H1 2023 from N11.34 billion in the same period of 2022.

“Energy is a major issue in the manufacturing sector. By the time you spend money on gas, black oil, diesel, and other energy sources, your production cost will be so high,” Israel Odubola, a Lagos-based research analyst, told BusinessDay.

The high energy costs are being driven by a number of factors, including the rising cost of diesel and the depreciation of the naira. This has put a strain on companies’ bottom line, which now have to pass on the higher costs to consumers.

Diesel generators have long been the primary source of backup power for businesses in Nigeria, with the price per liter fluctuating between N850 and N950.

Data sourced from the World Bank’s Power Sector Recovery Programme said inadequate power supply costs businesses in Nigeria about $29 billion yearly. It also observed that Nigeria had the largest number of people without access to electricity worldwide, as one in 10 people without access to electricity currently resides in Nigeria.

Read also: Cement makers race to alternative energy to tame rising power costs

Firm analysis

Dangote Cement

Dangote Cement fuel and power consumed increased by 21 percent to N157.02 billion in H1 2023 from N129.96 billion in a similar period of 2022.

The cement maker’s operating expenses increased to N198.71 billion in the first half of 2023 from N169.4 billion in the first half of 2022.

Dangote Cement’s profit stood at N178.6 billion from N172.1 billion while revenue grew to N950.83 billion from N808.04 billion.

Dangote Cement is a Nigerian publicly traded multinational cement manufacturer headquartered in Lagos. The company is engaged in the manufacture, preparation, import, packaging, and distribution of cement and related products in Nigeria, and has plants or import terminals in nine other African countries.

Read also: Snapshot of cement makers’ H1 performance

BUA Cement

BUA Cement’s energy cost grew 10 percent to N47.91 billion in H1 2023 from N43.58 billion in the same period of 2022.

The cement maker’s operating expenses grew to N20.16 billion from N13.52 billion in the period reviewed.

BUA Cement recorded an increase in profit after tax to N63.62 billion from N61.36 while revenue grew to N221.07 billion from N188.56 billion.

BUA Cement is a publicly listed firm headquartered in Nigeria, it produces and markets cement products in the country. It is the second largest producer in Nigeria after Dangote Cement.

Read also: Pricing turns cement makers’ new battleground

Lafarge Africa

Lafarge Africa outlines its energy cost but includes it in production fixed costs which include personnel expenses, by-products costs, and electrical energy expenses.

Lafarge Africa’s production fixed cost increased to N13.55 billion in H1 2023 from N11.34 billion in the same period of 2022.

The cement maker’s operating expenses increased to N51.53 billion from N47.76 billion in the comparable period.

Lafarge Africa’s profit after tax stood at N35.48 billion from N37.41 billion while revenue grew to N197.68 billion from N186.59 billion.

Lafarge Africa Plc is a cement manufacturer headquartered in Lagos and quoted on the Nigerian Stock Exchange. It is majorly controlled by the Holcim Group.