Snapshot of cement makers’ H1 performance

It has been a challenging year so far as Nigeria dominant cement players grapple with operational challenges, which have become phenomena in Africa’s largest economy, Nigeria.

We will be analysing the financial statement of the four dominant cement players quoted on the floor of the Nigerian Stock Exchange (NSE) – Dangote Cement plc, Lafarge Cement plc, Ashaka Cement plc, and Cement Company of Northern Nigeria (CCNN).

For the first six months of the year, the cumulative revenue of the four firms increased by a single digit or 6.48 percent, to N285. 97 billion from N268.55 billion the same period of the corresponding year (HY) 2013.

The single growth could be attributed to the weak demand for cement in the rainy season and also the delay in the passage of the 2014 budget, which slowed government expenditure.

Basically, the industry has been bedevilled by cost pressures due to the ramping up of turnaround maintenance cost combined with stoppages in gas supply, as a lot these firms have to switch to the Low Pour Fuel Oil (LPFO), which is an expensive alternative source of energy.

As a result of the aforementioned spiralling energy costs, cumulative profit after tax reduced by 6.56 percent to N116.09 from N124.25 billion in the preceding period.

Dangote Cement suffered the greatest hit at the bottom-line level as tax payments caused net income to fall by 11.37 percent, while net margin also declined with cost margins rising.

On the other hand, CCNN recorded the highest growth at the bottom-line with a 91 percent surge in sales.

Ashaka was the most efficient as it recorded a reduction in cost margin to 58.11 percent in HY 2014, as against 80 percent as of HY 2013, while net margin spiked to 28.49 percent in 2014, compared with 9.04 percent the preceding year.

We see the industry in growth spurt in Q3 and Q4, as the passage of the budget combined with election related spending will boost spending on infrastructure and demand for the product.

Patrick Atuanya and Bala Augie