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Tuesday, April 06, 2021 / 01:10 PM / by CSL
Research / Header Image Credit: Ecographics
Following the removal of movement restrictions in Q3
2020 and the resumption of economic activities, the impact of such reopening
was evident in the financial performance of the three major players in the
cement industry (Dangote Cement,
Lafarge
and BUA
Cement). Specifically, Dangote Cement recorded a 13% y/y increase in sales
volume (for its Nigerian operations), while Lafarge and BUA Cement reported
growth of 6% y/y and 13% y/y, respectively. The growth across the board
reflects the full reopening of the economy as many residential and commercial
projects began operations fully.
Recall that the restrictive measures put in place in
the second quarter of 2020 dealt a huge blow to the revenues of two (save for
BUA Cement) major cement players. Notably, the CBN Manufacturing PMI showed
that demand for new orders in the cement subsector slowed to 63.6 points at the
end of Q2 2020 from 70 points in Q1 2020.
However, demand for real estate investments which
improved amid favourable weather conditions and a low interest rate environment
led to increased demand for cement. The rise reflected in the real estate
sector evidenced by the posted recovery of 2.81% y/y as of Q4 2020.
Furthermore, there was an increased level of
government spending on capital projects as the sum of N1.74tn was spent for FY
2020, which is slightly below the budgeted capital spending of N1.96tn and
translates to a performance ratio of 89% compared with N1.21tn (41% of the
budgeted sum of N2.93tn) achieved in 2019.
Looking ahead, we expect moderate growth in the cement
sector to be supported by the government’s capital spending. However, the
pressured household income amid the fast declining purchasing power leaves the
possibility of a muted demand for housing projects. Furthermore, we anticipate
more price discounts from the market players to drive volume growth. That said,
we believe for the sector’s potentials to be fully attained, demand would need
to be boosted by improved consumer spending.
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N16.00K Final Dividend; (SP:N220.00K) - Lafarge Africa Plc FY2020 Results: Bottom-line Rises as Pandemic
Gets Plastered - Lafarge Africa Declares N30.8bn PAT in 2020 Audited Results,
Proposed N1 Final Div; (SP:N22.50k) - Cement Sector Update – In Search of Growth Triggers
- Nigerian Cement Sector Update October 2017: Strong Earnings Growth
Despite Subdued Macro - Cement Sector Update – Forging Ahead Through Macro Headwinds
- Nigerian Cement Sector Report – Cement Price: Litmus Test for FY-15E
Earnings - CSPR Sector Report – Cement Sector – Emerging Prominence From a
Deficit Past
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