Three cement producers listed on the Nigerian Exchange Limited (NGX), Dangote Cement Plc, BUA Cement Plc, and Lafarge Cement Plc, made a combined profit of N156.55 billion in the first quarter (Q1) of 2022, representing an increase of 29 percent from N121.2 billion reported in the first quarter of 2021.
Despite reporting a hike in the cost of sales and operating expenses, the growth in profit by Nigeria’s top cement makers was boosted by the increase in revenue.
The retail cement prices in Nigeria reportedly rose from around N2,400-N2,600 per 50kg bag in 2020 to an average of N4,000 at the end of March 31, 2022.
Meanwhile, Dangote Cement, Nigeria’s largest producer and the second most capitalized firm on the NGX, reported an 18 percent increase in its profit to N105.85 billion in Q1 2022 from N89.7 billion in Q1 2021.
The cement giant generated N413.18 billion in revenue in Q1 2022, representing an increase of 24.2 percent over the N332.65 billion recorded in Q1 2021.
However, Dangote Cement sales volumes in Q1 2022 were hampered by disruptions to gas supplies domestically and by high freight rates restricting its exports of cement and clinker to Cameroon, Ghana, and Sierra Leone.
Its cement sales volumes fell by 3.6 percent to 7.25 million metric tonnes in Q1 2022 from 7.52 million metric tonnes in Q1 2021.
In a statement, the chief executive officer of Dangote Cement, Michael Pucheros, said: “Our group volumes were down 3.6per cent mainly to energy supply challenges in Nigeria. The global supply chain challenges impacted our operations relying on cement and clinker imports – namely Ghana, Sierra-Leone, Cameroon.”
Additionally, its operations outside of Nigeria were also negatively affected by a cement plant in Congo being shut for over two months due to maintenance and repairs and extended power plant maintenance in Senegal.
However, BUA Cement saw a 22.4 percent increase in profit to N33.14billion in Q1 2022 from N22.4 billion in Q1 2021 as its revenue closed Q1 2022 at N96.99billion compared to N58.5 billion reported in Q1 2021.
While Dangote has continued to retain its spot as the largest cement manufacturer with a plant capacity of 35.2 million metric tonnes, BUA has overtaken Lafarge to the second position, with a total plant capacity of 11mmt while Lafarge stays at 10.5mmt.
BUA inaugurated Kalambiana’s three million metric tonnes line three plants in 2021, and its plant capacity has been projected by FBNQuest to reach 20 million metric tonnes by 2024, when the company commissions an additional nine million metric tonnes.
In addition, Lafarge Africa reported a 92.18 percent increase in profit to N17.6 billion in Q1 2022 from N9.14 billion in Q1 2021, while its revenue rose by 27 percent to N90.61 billion in Q1 2022 from N71.47 billion reported in Q1 2021.
Capital market analyst and a stockbroker, Mr. Rotimi Fakeyejo, said: “The strong growth across the listed cement manufacturing companies results from price increment in a product. The cement manufacturing companies have been compelled to increase the price to preserve margins from the impact of foreign exchange devaluation.”
He explained further that|: “For 2022, we are likely to see increased sensitivity from the private sector and take into account that this is a pre-election year. In pre-election years, you tend to see more cautious activities in the real estate sector because of uncertainties in the world economy.
“For public sector demand as well, we don’t expect any significant effect in that space as we see preparation for the coming elections distracting policymakers from implementing the capital expenditure in the budget for 2022.”
Similarly, a report by FBNQuest analysts stated that pre-election capital expenditure would help cement makers stay resilient in 2022.
The report predicts that subnational governments have the incentive to complete road and other infrastructure projects, which will drive demand for cement.
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