By Chinwendu Obienyi
With marginal increase in prices of cement this year, the revenue of three top tier cement manufacturing companies in Nigeria grew by N1.18 trillion in the first six months of 2022.
The three cement companies include; BUA Cement, Dangote Cement and Lafarge Africa Plc.
Daily Sun analysis of the three companies’ H1 2022 unaudited results showed that revenue grew by 23.3 per cent to N1.18 trillion from N959.84 billion reported in Half Year (H1) ended June 30, 2021.
For instance, Dangote Cement reported N808.04 billion revenue in H1 2022, representing an increase of 17 per cent from N690.5 billion earned in H1 2021. The group reported 16.8 per cent increase in cost of sales to N322.46 billion in H1 2022 from N276.12 billion in H1 2021, driven primarily by 31.3 per cent hike in fuel & power consumed that closed H1 2022 at N129.96 billion from N98.98 billion in H1 2021.
This, dampened the company’s profit as its profit before tax (PBT) declined to N264.5 billion from N281.3 billion recorded in 2021 while net profit dropped to N171.7 billion from N191.6 billion.
For BUA Cement, its PAT grew by 41.41 per cent from N43.39 billion in 2021 to N61.36 billion while its PBT rose to N74.89 billion from N49.70 billion recorded in 2021. Also, Lafarge Africa announced N37.4 billion profit in H1 2022 from N28.32 billion reported in H1 2021.
Reacting to the performance of the three companies, analysts noted that as rising inflation, rate hikes, persistent FX challenges and the impact of the ongoing Russian-Ukraine crisis on energy prices continue to exert pressure on the cost of operations and overheads, the company’s profitability margins, especially the bottom line is likely to be affected.
They further noted that the marginal increase in prices of cement this year impacted positively on the companies’ revenues. Daily Sun gathered that currently the retail price of 50kg bag of Dangote cement was sold between N3,900-N4,200, while BUA Cement and Elephant Cement produced by Lafarge Cement are sold for N3,800- N4,000 respectively.
Analysts at Nairametrics said that growth opportunities in the domestic cement markets are likely to continue as demand for cement from the private sector real estate, construction sector, and government infrastructural development would remain strong enough to keep prices elevated throughout the year despite the forecast and expected reduction in consumer purchasing power due to spiraling inflation.
“More so, as companies tilt towards alternative fuels like biomass for cement production, which is likely to reduce dependence on imported and costly energy sources; the expected contraction in profitability is likely to be ameliorated due to the expected reduction in energy costs”, they said.
For their part, analysts at Coronation Research, said, “Going into the Q3, we remain optimistic about demand expectations given the slowdown in the bouts of torrential rainfall that characterised most of the second quarter slowing down construction activity. The companies are also making efforts to mitigate the impact of rising energy costs by increasing the usage of alternative fuel mixes”.