Cement war: Dangote beat industry peers with 61% gross profit margin in 9M’21

Dangote Cement, Nigeria’s largest producer of cement and the most capitalized firm in the country has beat industry peers to become the most efficient cement maker in the industry in the first nine months of 2021.

BusinessDay analysis showed Dangote cement had an improved performance this year with a gross profit margin 61 percent in 9M’21 compared to 58 percent in the corresponding period last year while other industry peers such as BUA cement and Lafarge Africa also recorded a gross margin of 47 percent and 29 percent respectively in the first nine months of 2021.

Gross profit margin is a profitability ratio that calculates the percentage of sales that exceed the cost of goods sold. In other words, it measures how efficiently a company uses its materials and labour to produce and sell products profitably.

“Dangote Cement was the most efficient among industry peers because it was able to overcome the impact of currency devaluation and energy cost,” Mustapha Wahab, an infrastructure analyst at Chapel Hill Denham said.

The trio made a combined profit of N384.5 billion in the nine-month period, a 32 percent increase compared to N290 billion recorded in the same period last year.

“Cement makers were able to raise prices significantly in Q3. This is because they attempted to push some of the input cost pressure over the last couple of quarters on final consumers.

Read also: Strong management, good market position key to higher Return on Equity- Czartoryski

“Historically, Q3 is a disappointing quarter to cement makers and this is because of the impact of rainfall and that puts pressure on volume but it is a good thing that management across board was able to raise prices to offset,” Wahab said.

The Cement makers saw their revenue rise 30.2 percent to N1.43 trillion from N1.09 trillion recorded in the same period last year.

Dangote cement made a profit of N278 billion, a 33 percent increase from N208.6 billion in the nine-month period of 2021. The company’s sales grew to N1.02 trillion compared to N761.4 billion last year.

Its gross profit grew 39 percent to N618.7 billion in the first nine months compared to N443 billion recorded in the same period last year.

“Dangote Cement has exceeded its 2020 full-year results in the first nine months of 2021 with EBITDA currently trending at 45 percent YoY as at the end of September 2021, more than double the 21 percent EBITDA growth in 2020. Despite operating in a complex, challenging and fast-moving environment, Dangote Cement is consistently delivering superior profitability and returns to the shareholders,” Michel Puchercos, Dangote Cement’s CEO said.

Lafarge Africa (WAPCO) saw profit jump 43 percent to N40 billion in the first nine months compared to N28 billion the previous year. Revenue grew 22 percent to N219 billion in the first nine months of 2021 from N179 billion the same period last year.

WAPCO’s profit was helped by the 25 percent reduction in borrowing cost to N5.63 billion compared to N7.5 billion in the first nine months of 2020.

The cement maker’s gross profit jumped 14 percent to N64 billion from N56 billion in the periods under review.

BUA cement saw a 23 percent increase in profit to N65.9 billion in the first 9 months compared to N53.4 billion in the same period of 2020. Sales surged 19 percent to N186 billion in the period under review from N156.6 billion recorded the year before.

BUA’s gross profit grew 24 percent to N87.2 billion in the period under review compared to N70 billion in the corresponding period last year.