We will be analysing cement makers third quarter performance viz a viz the challenges and opportunities in the industry.
Nigeria has outstripped South Africa as sub-Saharan Africa’s largest cement producer, as industry capacity passed the 30 million metric tons mark and has the potential of reaching 58.5 million metric tons.
Gas shortages challenges, huge tax liability slows bottom-line
Cement companies have been suffering from an energy crisis as supply from gas plant has been intermittent thus culminating in spiralling production costs that slowed bottom line performance.
Also bleeding profit is huge tax liability suffered by some of the firms as tax holiday enjoyed on some of their plants have lapsed.
As a result of the aforementioned, cumulative net income of the four dominant cement makers (Dangote, Lafarge, Ashaka and Cement Company of Northern Nigeria (CCNN) fell by 15.03 percent to N178.04bn from N209.96bn the preceding year.
Lafarge was the most hit at the bottom-line level as net income declined by 38 percent.
Dangote also witnessed a 10 percent decline in net income as shortages of gas and higher tax liability bled profit.
CCNN, Ashaka records growth amid insecurity and operating challenges
The best performers in the third quarter are CCNN and Ashaka Cement. Both firms are bedevilled by insecurity in the north part of the country where they operate.
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Ashaka Cement, a subsidiary of Lafarge Africa, located in Gombe, recorded a 103.4 percent growth in net come while cost margins reduced drastically thanks to the company’s ability to substitute Low Pour Fuel Oil (LPFO) with coal in its fuel mix.
CCNA, a subsidiary of BUA Limited, also recorded impressive results in the review period as net income increased by 19.03 percent as it continues to keep costs to its barest minimum.
Weak sales on rainy season and security challenges
The table shows the four players quoted companies in the industry recording single digit growth in sales. This was caused by weak construction activities and the rainy reason.
The four firms recorded a 6 percent increase in cumulative revenues to N499.17bn from N472.0bn in the prior year.
It should be noted that the upheaval in the North part of the country by the Boko Haram Insurgents could disrupt production at the factory of firms operating in the region.
Rapid urbanisation, rise in middle class to spike demand Rapid urbanisation combined with rising middle class that crave for accommodation are expected to spike the demand for cement which means Nigeria cement makers future is stellar.
Moreover, the 17 million housing deficits and the new housing refinancing scheme highlights the copious opportunities awaiting cement manufacturers in Africa largest economy.
Patrick Atuanya & Bala Augie
