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Amid tough business environment, Dangote Cement net sales rises to 36.6%

Nigeria’s cement companies are going through a rough patch despite rising market product prices. Rising input and logistics costs and falling exchange rates have made cement-making difficult.

A senior executive of one of the big three product manufacturers who requested anonymity said, “We understand the social sensitivity of cement, but to ensure sustainability, we must align pricing with costs.

“We must find that balance between customer affordability and production sustainability.

“In the last two years, margins have fallen steadily despite price increases; the margin squeeze comes from costs rising faster than revenues.” But he laments, “We still come off as villains whether margins go up or down.”

Nevertheless, for good or bad, the Nigerian economy is adapting to a series of policy adjustments implemented by the new administration in 2023. The decision to adopt a floating exchange rate for the naira and remove petrol subsidies has led to currency depreciation, raising business operational expenses. As a result, inflationary pressures have intensified, affecting consumer prices and market demand.

In 2023, Dangote Cement was exposed to currency fluctuations across African economies, with Nigeria being the most affected.

The Nigerian Naira experienced a significant depreciation of 51.6 percent against the US Dollar, while the Zimbabwe Kwacha similarly depreciated by 29.7 percent against the Dollar. However, amidst these depreciations, the FCFA (XAF) stood out with a modest appreciation of +3.5 percent .

These currency movements introduced high exchange rate volatility, affecting the cost of imports, creating disruptions in trade balances, and contributing to higher levels of economic uncertainty and inflation.

Dangote cement’s total sales and administrative expenses rose by 31.1 percent to N491.6bn in FY 2023, driven by the 27.6 percent increase in haulage expenses due to the significant rise in coat of AGO, coal and other materials.

The total production cost of sales also increased by 51.8 percent to N1.006trn in 2023 from N662.9bn in FY 2022, owing to an increase in fuel and power consumed, which increased by 49.80 percent to N399.2bn; depreciation and amortisation increased by 34.99 percent , and other production cost increased by 126.77 percent .

Group earnings before interest, tax, depreciation, and amortisation (EBITDA) for the year increased by 25.1 percent to N886.1bn at a margin of 40.1 percent from N708.2bn in 2022. Pan-African EBITDA grew four times larger to N263.7bn in FY 2023, at a record margin of 28.5 percent from N64.9bn in 2022; this growth was supported by solid volume growth and a reduction in cash cost in some countries of operation.

Dangote Cement’s revenue from its Pan-African operations grew in 2023, more than doubling its 2022 figures. The growth rate rose by +123.2 percent, to N925.93bn from N414.83bn in 2022.

The increase was driven by volume growth in Senegal, Congo, and Zambia. Sales volume across the four Pan-African operations grew substantially, climbing by +12.7 percent to 11.25Mt in FY 2023 from 9.98Mt in FY 2022.

The Nigeria operation experienced a slight growth of +7.7 percent to N1.297trn on price increases, while the sales volume from the Nigeria operation, which is cement and clickers, stood at 16.4Mt in 2023, down by -8.1 percent from 17.8Mt in 2022

Despite facing various expenses such as production, administrative, and selling/distribution expenses, the company increased its profit before tax (PBT) to N553.10bn in FY 2023 from N524.002bn in FY 2022, reflecting a growth of 5.55 percent . The cement company managed its income tax expenses, resulting in an increase of 19.17 percent in profit after tax (PAT) from N455.58bn to N382.311bn.

Due to higher non-taxed exchange gain in the period, the effective tax rate increased to 17.6 percent in FY 2023 from 27.0 percent in FY 2022. Moreover, gains from the net monetary position and contributions from a share of profit from associates also contributed positively to the bottom line.

Dangote Cement’s financial position improved from FY 2022 to FY 2023, with its total assets increasing by +50.58 percent from N2.62trn in FY 2022 to N3.94trn in FY 2023.

This was driven by growth in the group’s liquidity position, such as a +57.52 percent growth in cash and cash equivalents, +117.91 percent growth in right-of-use assets, and a +60.95 percent rise in trade and other receivables.

On the other hand, liabilities arising from financing activities have increased by 23.81 percent  to N521.3bn due to the 707.80 percent increase in (three-to-twelve-month loan repayment). Moreover, the group’s retained earnings increased in FY 2023, rising to N1.09trn as the net income of N455.58bn exceeds the dividend payout of N338bn.

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