DangCem earnings under pressure as finance cost rises by 98% -

Earnings reported by Dangote Cement (DangCem) in 2022 have grown more slowly than expected, reflecting pressure from high prices of cost items, as costs continue to climb as a result of growing inflation and the naira devaluation.

Data reveals that the cement maker reported profit and earnings before, interest, tax, depreciation, and amortization (EBITDA) growth of 4.9 percent and 3.45 percent respectively in 2022.

DangCem’s profit grew to N382.31 billion in 2022 from N364.44 billion in 2021; finance income surged by 86.42 percent to N38.72 billion in 2022 from N20.77 billion in 2021.

The firm’s finance costs grew faster by 98.40 percent to N130.37 billion in 2022 from N65.71 billion in 2021.

DangCem’s finance costs surged on the back of a 515 percent spike in foreign exchange loss during the period to N53.9 billion from N8.77 billion in 2021.

EBITDA grew to N708.24 billion in 2022 from N684.6 billion in 2021.

While earnings grew at a slow pace, the cement maker reported double digits revenue amounting to N1.62 trillion in 2022, 16.96 percent up from N1.38 trillion in 2021, on the back of price increases during the period which offset volume declines.

The group’s average price per tonne grew by 23.30 percent to N58,282 per tonne in 2022 from N47,270 per tonne in 2021, while volumes sold declined by 5.14 percent 27.77 million tonnes (Mt) from 29.27 million tonnes in 2021.

Management attributed the decline in volumes to consistent disruptions in energy supply as witnessed in the third quarter of 2022, heightened inflation, and the high base of 2021.

In Nigeria, DangCem sold 17.8Mt of cement and clinker during the period, down 4.1 percent from the 18.6Mt sold in 2021, while the average price per tonne was 26.58 percent higher year on year, bringing revenues to rise by 21.3 percent to N1.21 trillion in 2022.

“The slightly lower volume, elevated by the high base of 2021 was due to significant inflation, rising interest rates, and energy supply disruptions which impacted production. The energy disruptions were largely due to low gas generation in the country. Collectively, this negatively impacted our ability to maximize production during the period,” DangCem said.

The pan-African operations sold around 10.0Mt of cement and clinker in 2022, down 8.1 percent from the 10.9Mt sold in 2021, due to the continuous global supply chain disruption and increasing commodity prices.

“This was exacerbated, by a shutdown in our Congo plant for over 2 months owing to maintenance and repairs, coupled with extended power plant maintenance in Senegal. In Cameroon, Ghana, and Sierra Leone freight costs remain substantially elevated, causing volatility in the landing cost of cement and clinker. The total pan-African volume accounts for 35.9 percent of Group volumes,” according to DangCem.

The cement makers’ input costs during the period claimed 40.96 percent during the period and grew by 20.30 percent in 2022 to N662.89 billion from N551.02 billion in 2021.

Michel Puchercos, chief executive officer, said “for our operations, Dangote Cement experienced a surge in prices of our inputs costs; significant foreign exchange fluctuation in our countries of operation; and a drop in gas availability in Nigeria.”

Materials consumed increased by 12.1 percent to N196.5 billion, despite the reduction in production volume owing to inflationary pressures, while fuel & power consumed increased by 35.5 percent to N266.5 billion due to increasing energy costs especially AGO and coal.

Operating expenses rose by 46.52 percent to N375.11 billion in 2022 from N256.01 billion in 2021 on the back of a 54.04 percent increase in selling and distribution costs.