Dangote Cement Plc, a subsidiary of Dangote Group, has disclosed plans to commence mining its own coal at Ankpa, Kogi State by fourth quarter of the year.
The company also said that due to acute gas shortages in the country following disruptions occasioned by militancy in the Niger Delta region, it has switched its plant lines to coal to minimize cost and increase margin.
The Group Chief Executive officer, Mr. Onne van der Weijde, made the disclosure while addressing stockbrokers at the company’s Facts Behind Figures on the Nigerian Stock Exchange (NSE).
He assured that the quality of the coal to be mined by the company would be of high quality and good enough to be used 100 per cent without blending.
He stated that in the interim, Dangote Cement has started using locally purchased coal blended with imported one to assure optimal quality, while saying that the company could potentially run all its lines 100 per cent on local coal at lower cost than gas.
He said already, two coal mills at its Obajana Cement factory became operational in July, adding other coal mills will resume operation by the end of September.
“We decided two to three years ago to diversify and re-risk fuel supplies,” he said.
“Kiln fuel is the major cost of cement production; our group margins are affected by the mix of fuel in Nigerian kiln. The preference is to run on gas because disruptions and maintenance have led to shortages since 2014, thus affecting our margins. Also back-up LPFO is often not available locally, forcing production shutdowns prior to use of coal,” he said.
He also added that gas is priced is US dollars, but paid in naira and therefore is affected by foreign exchange, FX. However, locally bought or mined coal will be priced in naira.
Reviewing the operation in the first half, H1, of the year, he said that Dangote Cement grew sales volume by 60 per cent, saying that the growth is expected to continue in the second half of the year.
He noted that its factories in Tanzania and Congo are expected to commence full operation during the H2 and would contribute to drive volume going forward.
The Group financial highlights for H1 showed 20.6 per cent growth in revenue to N292.2 billion; Group cement volume was up 59.6 per cent to almost 13.0Mt, while Nigeria achieved record sales volume of 38.8 per cent to more than 8.7Mt after price reduction.
However, earning before interest, taxes, depreciation and amortization, EBITDA, was down 10.2 per cent to N132.5 billion at 45.4 per cent margin on lower selling price, higher fuel costs in Nigeria and plants in ramp-up.
Profit before tax was marginally down three percent to N124.9 billion, while post tax profit stood at N103.4 per cent, 15.1 per cent decline over N121.8 per cent in H1, 2015.
