Cement companies report N1.709 trillion revenue in 9 months amid operational headwinds

Three cement companies listed on the NGX raked in N1.709 trillion worth of revenue during the nine months that ended September 30, 2022, representing a 19.68% growth over N1.428 trillion reported by the companies in Q3 2021. 

This is according to information gleaned from the unaudited third-quarter financial results of the cement companies, namely Dangote Cement Plc, BUA Cement Plc and Lafarge Africa Plc. 

The 19.68% revenue growth was despite the cost pressures faced by the companies. Nairametrics understands that said cost pressures were due to the depreciation of the naira and macroeconomic inflationary pressures, especially in the domestic market where the average inflation rose between January and September to 20.77%.  

Cement profits: According to data tracked by Nairametrics, the combined profit after tax of the cement companies for the period under review declined by 13.66% to N332.014 billion from N384.550 billion in Q3 2021. And this was due to the rising cost of sales which swallowed much of the earnings. The companies’ cost of sales for the nine months stood at N761.738 billion against N620.128 billion in 2021, a 22.83% increase.   

Breakdown of analysis: A closer look at the financials showed that Dangote Cement Plc maintained a lead in revenue generation, followed by Lafarge Africa Plc and BUA Cement Plc. 

Dangote Cement reported revenue of N1.177 trillion, a 15.16% increase from N1.022 trillion in 2021. Due to the high cost of sales, the company’s profit after tax declined by 23.41% to N213.101 billion from N278.250 billion in 2021. The cost of sales had risen by 19.94% to N483.831 billion from N403.388 billion, consuming about 41.12% of the total revenue. 

BUA Cement recorded revenue of N262.6 billion, a 40.5% increase year-on-year compared to N186.9 billion in 2021. The company’s profit after tax for the period under review was N74.014 billion against N65.906 billion in 2021, representing a 12.30% increase. The cost of sales stood at N142.829 billion during the period under review from N99.654 billion in 2021, representing a 43.32% increase.

 Also, Lafarge Africa announced N269.8 billion in revenue as of the third quarter of 2022, a 23.08% increase from N219.2 billion recorded in 2021. The cement firm also reported N44.899 billion in profit after tax during the review period from N40.394 billion posted in 2021, amounting to an 11.15% growth. The group’s cost of sales for the period stood at N135.08 billion from N117.09 billion in 2021, representing a growth of 15.36%. The cost of sales consumed 50.06% of the total revenue. 

Cutting cost measures: High energy cost was one of the drivers of the companies’ cost of sale during the period. Nairametrics detailed how Dangote Cement and BUA Cement incurred N263 billion in fuel costs over nine months. Meanwhile, the companies have since began adopting alternative measures to cut down energy costs.

The Chief Executive Officer of Dangote Cement, Michel Puchercos, explained that to checkmate the impact of high energy costs, the group is strengthening its efforts to ramp up the usage of alternative fuels. 

• ”So far this year, we have co-processed 101,553 tonnes of waste, representing a 77% increase in 2021. We are on track to commission our alternative fuel feed system at Obajana lines I and V, and Ibese line II in November. 
• ”In addition, we are ramping up our investment in compressed natural gas, CNG, to reduce our AGO usage.” 

The Chief Executive Officer of BUA Cement, Mr Yusuf Binji, said during a conference call that the cement maker has resorted to using locally sourced coal and liquefied natural gas in favour of imported coal to withstand the stress in the foreign exchange market. 

The Corporate Affairs Manager of BUA Cement, Mr Otega, in a report cited by Nairametrics said: 

• “BUA Cement’s switch to LNG at our Sokoto plant was a strategic decision done for efficiency gains and to reduce our foreign exposure on coal imports since LNG can be sourced locally. 
• “We started the conversion of the plant last year and it is now completed. BUA Cement’s Sokoto plant now runs on locally sourced coal and LNG rather than the previous mix of local and foreign-sourced coal and LPFO. LNG will also be used to power engines used in generating electricity and will replace LPFO and AGO. 
• “Additionally, the use of LNG will also reduce our carbon footprint and conserve the environment in line with our commitment to environmental sustainability and the Paris Accord of which Nigeria is a signatory.” 

Forex impacted costs: Khaled El Dokani, CEO of Lafarge Africa noted that in Q3 2022, the company’s Net Sales improved by 12.2% over Q3 2021. He added that the worsening exchange rate situation impacted the firm’s cost of sales, specifically key supplies indexed to the U.S dollar. He said:

• “This constrained our recurring EBIT growth. As a result, Q3 EBIT was 19.3% lower than last year. Without the FX impact, our Q3 EBIT improved by 8% vs last year. Our 9M 2022 results underscore the Company’s resilience, with 23.1% growth in Net Sales, 17.5% growth in EBIT and 11.2% growth in Net Income.  
• “We remain committed to our sustainability ambitions by utilizing affordable clean energy in our operations and optimizing our green logistics strategy; among other initiatives that are in alignment with our net zero pledge journey’’. 

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Editing by Emmanuel Abara Benson

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