Dangote Cement Plc. a multinational cement manufacturer, has reported N2.5 trillion in revenue for the nine months of 2024, largely fueled by increased local market sales, a BusinessDay analysis has shown.
According to the cement maker’s result, its revenue grew by 69.1 percent from N1.5 trillion reported in the same period of 2023 with Nigeria sales volume rising by 9.5 percent and Pan-Africa market sales declining by 1.6 percent.
“Our financial results for the nine months demonstrate superior performance across key metrics, as we diligently execute our strategic priorities for the year. Group volumes grew by 1.9 percent year-on-year to 20.7Mt, largely due to a significant rebound in Nigeria,” said Arvind Pathak, chief executive officer, Dangote Cement.
He noted that this growth was supported by promotional activities and enhanced route-to-market solutions, which helped mitigate the impact of adverse weather conditions.
Dangote Cement’s earnings before interest, taxes, depreciation, amortisation & impairment (EBITDA) spiked by 37.10 percent to N908.69 billion as at September 2024 from N662.76 billion as of September 2023.
A breakdown of figures shows Dangote Nigeria’s EBITDA rose by 37.25 percent to N506.11 billion while the Pan-African regions were up 45.35 percent to N170.01 billion.
After-tax profit during the period increased by a single digit 0.55 percent to N279.09 billion from N277.5 billion.
A further analysis of the company’s statement disclosed that in the first nine months, the cost of sales increased by 92 percent, rising to N1.2 trillion from N642 billion in the same period of 2023.
This was mainly driven by elevated energy costs (109.4 percent) and haulage expenses (91.2 percent) due to rising energy prices.
Analysts at CardinalStone Research said, “This led to gross margin compression by 5.9 ppts to 51.7 percent and EBIT margin contraction by 7.7 ppts to 29.3 percent. However, management noted some progress made in its migration to cost-saving alternatives, with 11 of 17 alternative fuel projects commissioned and the arrival of 1,500 CNG trucks announced.”
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Of course, Dangote Group felt the pang of foreign exchange volatility and inflationary pressures brought on by the monetary policies of the Central Bank of Nigeria (CBN) that ballooned borrowing costs. Fuel and energy costs aggravated the margins as it incurred foreign exchange revaluation losses of N222.09 billion.
The liberalisation of the foreign exchange regime weakened the naira from 463.38/$ to N1,654.09/$1 from June 2023 to October 2024 (Thursday, October 24). At the parallel market, the naira depreciated to N1,728/$1 from 762/$.
The increase in petrol prices and foreign exchange costs contributed to the surge in the country’s headline inflation rate, which rose to 32.70 percent in September, according to the National Bureau of Statistics (NBS).
To cushion the inflation rate, the apex bank started its monetary policy tightening cycle in May 2022, with its benchmark interest rate rising from 11.5 percent to 27.25 percent in September 2024.
As a result of the elevated interest rate environment in the economy, the cost of borrowing funds has more than doubled for companies which can reduce their profitability.
Further analysis of the company’s statement disclosed that its net finance cost increased by 149.1 percent to N422.09 billion in 9M 2024, up from N169.43 billion in 9M 2023. This increase was primarily driven by a substantial rise in finance costs, which grew to N451.29 billion from N190.10 billion.
“The spike in finance costs is largely attributed to foreign exchange (FX) losses stemming from the further devaluation of the Naira and increased interest expenses. FX losses rose by 124.3 percent to N222.08 billion, compared to N99.02 billion in 9M 2023. Meanwhile, finance income also saw an increase, reaching N29.13 billion from N20.67 billion,” analysts at CSL Stockbrokers disclosed.
Pathak, in the company’s earning report, said leveraging the group’s robust export-to-import strategy, Dangote Cement completed 22 shipments of clinker from Nigeria to Ghana and Cameroon.
This effort resulted in a 75.5 percent increase in its Nigerian exports, highlighting commitment to promoting African cement self-sufficiency, h added.
Looking ahead, he said the group’s key focus remains on enhancing efficiency and delivering greater value. “We will continue to prioritise innovation, cleaner energy transition, and cost leadership towards achieving our vision of transforming Africa and building a sustainable future.”
“We expect top-line performance to remain solid in Q4-24, largely driven by price increases but remain cautious about volume growth following indications of minimal capital expenditure implementation from the federal government, as well as challenging weather conditions in the Pan-African region. Furthermore, persistent cost pressures are likely to constrain margins and impact overall earnings,” analysts at Cordros Securities said in a note.
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