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Cement giants bet on expansion plans as long-term borrowings soar by 71%

Cement giants bet on expansion plans as long-term borrowings soar by 71%

In a bid to boost expansion plans, Nigerian cement makers have recorded a 74 percent surge in long terms borrowings in the first quarter of 2023.

Data compiled by BusinessDay showed Dangote Cement, BUA Cement, and Lafarge Africa recorded a cumulative surge in long-term borrowings to N405.95 billion in the first quarter of 2023, coming from N233.50 billion in the same period of 2022.

Further analysis revealed Dangote Cement and BUA Cement recorded 91.4 percent growth and 19.1 percent growth in long-term borrowings during the period reviewed while Lafarge Africa recorded a 38 percent decline.

“Dangote Cement and BUA Cement are borrowing to fund expansion in capacity which are funded mainly by borrowings while Lafarge Africa is lowering its borrowing position because the firm doesn’t have much expansion ongoing for them,” Kayode Eseyin, a research analyst with CardinalStone Partners, said.

He added that Lafarge Africa has a significant cash position hence they don’t necessarily need to borrow.

In June 2023, BUA Cement Plc said it had secured a $500 million facility from the International Finance Corporation (IFC) and partners to develop energy-efficient cement production capacity and strengthen its equipment and logistics capabilities in northern Nigeria.

The company, in a statement, said this investment, marked the largest-ever investment by IFC, will create up to 12,000 direct and indirect jobs and contribute to economic and infrastructural development within Nigeria and the greater Sahel region.

For Dangote Cement, it has concluded plans to expand its production capacity through the construction of a new 6Mt integrated cement plant in Itori, Ogun State.

According to Arvind Pathak, group managing director of Dangote Cement, the new plant on completion, will strengthen local production of Dangote Cement in Africa.

Besides, Dangote Cement will soon deploy grinding plants in Ghana and Cote d’Ivoire to ensure cement becomes available in all African countries.

Dangote Cement, BUA Cement, and Lafarge Africa also recorded a cumulative 3 percent drop in short-term borrowings to N414.45 billion in the first quarter of 2023 from N426.83 billion in the same period of 2022.

Read also: Nigeria’s economic prosperity hinged on growth of MSMEs

Firm analysis

Dangote Cement

Dangote Cement’s long-term borrowings grew to N342.05 billion in the first quarter of 2023, a 91.4 percent increase from N178.75 billion in the same period of 2022.

The cement maker’s short-term borrowings arrived at N338.83 billion in the first quarter of 2023, an 8 percent dip from N368.72 billion in the same period of 2022.

Dangote Cement’s cash and cash equivalents amounted to N248.5 billion from N126.82 billion which shows that they have a healthy amount of cash and cash equivalents which reflects positively that they can meet their short-term debt obligations.

Movement in the cash and cash equivalent reveals that net cash generated from operating activities stood at N115.7 billion from N213.13 billion.

Net cash used in investing activities stood at N71.98 billion from N255.68 billion negative cash flow year on year.

Net cash used in financing activities amounted to a positive of N57.24 billion from N91.49 billion negative cash flow during the period reviewed.

Dangote Cement Plc is a Nigerian publicly traded multinational cement manufacturer headquartered in Lagos. The company is engaged in the manufacture, preparation, import, packaging, and distribution of cement and related products in Nigeria, and has plants or import terminals in nine other African countries.

BUA Cement

BUA Cement’s long-term borrowings increased to N62.48 billion in the first quarter of 2023, a 19.1 percent increase from N52.46 billion in the first quarter of 2022.

The cement maker’s short-term borrowings stood at N42.1 billion in the first quarter of 2023, a 17.7 percent increase from N35.76 billion in the similar period of 2022.

BUA Cement’s cash and cash equivalents dropped to N29.86 billion, coming from N48.05 billion which reflects the firm’s ability to meet their short-term debt obligations has reduced.

Further analysis of the movement in BUA Cement’s cash and cash equivalents reveals that net cash flow from operating activities dipped to N18.7 billion in the first quarter of 2023 from N149.57 billion in the first quarter of 2022.

Net cash flows used in investing activities stood at N16.8 billion negative cash flow from N102.28 billion negative cash flow during the period reviewed.

Net cash flows used in financing activities stood at N19.98 billion in the first quarter of 2023 from N61.63 billion in the first quarter of 2022.

BUA Cement PLC is a publicly listed firm headquartered in Nigeria, it produces and markets cement products in the country. It is the second largest producer in Nigeria after Dangote Cement.

Lafarge Africa

Lafarge Africa’s long-term borrowings dropped to N1.42 billion in the first quarter of 2023, a 38 percent decline from N2.29 billion in the similar period of 2022.

The cement maker’s short-term borrowings stood at N33.52 billion in the first quarter of 2023, a 50 percent increase from N22.35 billion in the first half of 2022.

Lafarge Africa’s cash and cash equivalents arrived at N104.88 billion from N38.04 billion which shows the company more than doubled the amount of cash and cash equivalents it can use to meet short-term debt obligations.

The movement in the cash and cash equivalents reveals that net cash flow generated from operating activities reached a positive cash of N13.88 billion in the first quarter of 2023, coming from a negative cash flow of N946.12 million in the first quarter of 2022.

Net cash flow used in investing activities recorded N7.29 billion from N2.45 billion negative cash flow year on year.

Net cash flow used in financing activities amounted to N18.3 billion negative cash flow in the first quarter of 2023 from a negative cash flow of N7.19 billion in the same period of the prior year.

Lafarge Africa Plc is a cement manufacturer headquartered in Lagos and quoted on the Nigerian Stock Exchange. It is majorly controlled by the Holcim Group.