…Dangote bucks trend
The combined profit of cement manufacturers in Nigeria fell in the first three months of 2024 as the devaluation of the naira overshadowed a surge in sales.
The latest financial statements of Dangote Cement Plc, BUA Cement Plc, and Lafarge Africa Plc shows that their combined after-tax profit declined to N135.5 billion in Q1 from N151.2 billion in the same period of last year.
That’s despite the three firms declaring combined revenues of N1.12 trillion, an increase of 86.6 percent from N604.9 billion.
Dangote Cement however bucked the trend following an increase in its after-tax profit to N112.7 billion in Q1 from N109.5 billion in the same period of 2023.
Lafarge recorded a decline of N5.19 billion from N14.9 billion and BUA Cement’s earnings fell to N17.9 billion from N26.8 billion.
“Despite elevated cost pressures, increased borrowing costs, and a further currency weakening, our first-quarter results reflect our commitment to navigating challenges effectively.
“Group revenue more than doubled to N817.4 billion, while Group’s Earnings Before Interest, Taxes, Depreciation, and Amortisation rose 66.6 percent to N309.5 billion,” Arvind Pathak, chief executive officer of Dangote Cement, said.
He said driven by an uptick in economic activities, the Nigerian operations witnessed a strong rebound, with volumes up 26.1 percent to 4.6Mt in the quarter and that the pan-Africa operations continued an upward trajectory, with volumes up 3.1 percent to 2.7Mt, buoyed by increased sales in Zambia and Congo.”
Pathak added that during the quarter, the group intensified their emphasis on exports, dispatching seven ships from Nigeria to Ghana and Cameroon.
“As a result, our Nigerian exports surged by 87.2 percent, reflecting our commitment to expanding our presence in regional markets and capitalising on our export-to-import strategy.”
For Lafarge, foreign exchange losses due to further naira devaluation in the quarter resulted in an after-tax decline of 65 percent.
“We experienced a growth in cement sales as the market recovered in the quarter. In spite of the challenging macroeconomic environment, we continue to focus on delivering sustainable value for all our stakeholders, positioning us for sustainable growth over the medium to long term,” Lolu Alade-Akinyemi, CEO of Lafarge Africa, said.
Last June, the Central Bank of Nigeria (CBN) reintroduced the willing buyer, willing seller model in the foreign exchange market.
The official exchange rate has fallen from N463.38/$ at the time to N1,390.9/$ as of April 30, 2024. At the parallel market, the naira is being traded at around 1,380/$ as against 762/$ before the FX reform.
The high cost of sourcing FX led to Lafarge incurring a high net foreign exchange loss of N21.8 billion in Q1 from a gain of N324.4 million in the same period of last year.
BUA Cement reported an FX loss of N10.1 billion from a gain of N1.71 billion and Dangote Cement had an FX loss of N63.8 billion from N9.79 billion.
Further down, Lafarge recorded a net finance cost of N21.5 billion in Q1 compared to the net finance income of N24.23 million in Q1 2023.
“Just like its local peers, the company recorded net FX losses amounting to N21.80 billion in Q1, due to the naira depreciation in the first three months of the year (-30.5 percent to N1,309.39/$),” analysts at Cordros Research said in a note on Tuesday.
For BUA, the analysts added that net finance costs fell by 53.8 percent year-on-year, primarily due to the 49.4x year-on-year increase in finance income amid a 10.4 percent year-on-year increase in finance cost.
“Following the naira depreciation in Q1, we highlight that the group recorded FX losses of N10.06 billion (vs FX gain of N1.71 billion in Q1 23).”
Earlier in the year, many developers were forced to abandon building sites due to the sudden rise in the prices of cement and other major building materials.
But last month, there has seen a significant turnaround with prices tumbling from between N10,000 and N15,000 per 50kg bag to between N7,000 and N8,000.
A recent market survey conducted by BusinessDay in different locations across the country confirmed a price drop, ranging between N7,000 and N7,500 per bag, though BUA cement is selling for N7,500 to N7,800 per 50kg bag, depending on location.
“Nigerians stopped demanding for cement; many project sites were abandoned as developers sat back and waited for the prices to come down. So, what has happened is an interplay of demand and supply with price responding, which is Economics at work,” Collins Okpala, an Abuja-based cement dealer, said.
Analysis of individual firms
Dangote Cement
Dangote Cement’s revenue rose to N817.4 billion in Q1 2024 from N406.7 billion in the same period of last year. The firm’s production cost of sales also increased to N398.2 billion from N163.7 billion.
Its finance costs grew from N32.5 billion to N123.2 billion and income tax expense rose to N53.7 billion from N37.3 billion.
BUA Cement
The revenue of BUA Cement increased to N161.3 billion in Q1 this year from N106.4 billion in the same period of 2023. The firm’s cost of sales rose to N116.2 billion from N55.9 billion.
Its net finance costs declined to N1.82 billion from N4.36 billion and income and deferred taxes dropped from N8.66 billion to N3.32 billion.
Lafarge Africa
Lafarge Africa’s revenue rose to N137.7 billion in Q1 from N91.8 billion in the same period of 2023. The firm’s cost of sales rose to N72.1 billion from N45.3 billion.
Finance costs jumped to N23.1 billion from N671.6 million while income tax expense fell to N3.52 billion from N7.54 billion.
