Dangote Cement, Lafarge Africa, BUA Cement report N270.88bn profit in H1 2022

Three cement producing companies, Dangote Cement Plc, BUA Cement Plc and Lafarge Africa Plc have announced N270.88billion profit in unaudited half year (H1) financial statements for the period ended June 30, 2022.

This is 2.8 per cent increase from N263.35billion profit reported in H1 2021.

The three companies surmounted pressure on the production cost of sales in the period, attributable to hike in the inflation rate, fuel consumption, and dwindling value of the Naira at both the parallel and official market rate in the period under review.

The breakdown of profit, according to Westernpost investigations revealed that Dangote Cement reported 10.2 per cent decline in profit to N172.1billion in H1 2022 from N191.63billion in H1 2021, while Lafarge Africa announced 32.1 per cent in profit to N37.4billion in H1 2022 as against N28.32billion reported in H1 2021.

The CEO of Lafarge Africa, Khaled El Dokani in a statement said: “Our H1 2022 results are even more impressive, with 28.7per cent and 32.1per cent growth in net sales and net income, respectively.

“This further confirms the consistent resilience and robustness of our business. We are equally pleased with the progress we are making on sustainability; our use of affordable clean energy and agro-ecology footprint are in accordance with our net zero pledge journey.”

Also, BUA Cement show its profit increasing by 41.4 per cent to N61.36billion in H1 2022 from N43.4billion in H1 2021.

As gathered by Westernpost, Dangote Cement still maintains its leading position in revenue, followed by BUA Cement. The three cement companies reported a whopping sum of N1.18trillion revenue in H1 2022, representing an increase of 23 per cent from N959.84billion in H1 2021.

Dangote Cement in H1 2022 reported N808.04billion revenue, an increase of 17 per cent from N690.55billion in H1 2021, while BUA Cement reported N188.56billion revenue in H1 2022 from N124.3billion in H1 2021.

Lafarge Africa announced 28.7per cent increase in revenue to N186.6billion in H1 2022 from N145.02billion in H1 2021.

Analysts at Vetiva research in a report titled; “Nigeria H2’22 Outlook: A strange labyrinth” said: “Over the past six months, overall cement demand has increased, owing to the significant rise in real estate activities from private sector housing constructions as well as ongoing infrastructure construction by the Federal Government. This was reflected in the sector’s contribution to GDP which improved 4.08ppts q/q to 9.57per cent in Q1’22.

“Another factor underpinning this growth is investors’ renewewed interest in alternative investment outlets, due to the lowered yields in the Fixed Income market. Consequently, cement producers recorded double-digit revenue growth in Q1’22. For context, backed by increased real estate activities by the private sector, Julius Berger’s building works increased by 85 per cent.

“Cement producers have benefited from the ongoing construction of infractrucure projects, like rail and roads by the Federal Government and the demand for housing infrastructure by the private sector. During the Q1’22 period, Real estate sector growth expanded by 2.67ppts to 4.14 per cent, reflecting the surge in housing demand.

“Furthermore, raw input costs have remained elevated, driven by persistent FX challenges and rising inflationary pressures. Also, the upward impact of the ongoing Russian-Ukraine crisis on energy prices has caused an increase in diesel and gas prices, which has emerged as a major threat to profitability. To combat these rising cost lines, cement players like Dangote Cement Plc, through its Alternative Fuel Project, and Lafarge Africa, through its subsidiary Geocycle, are tilting towards alternative fuels like biomass for cement production in their plants. Most of the components of the biomass fuel are locally sourced, reducing their dependence on imported and costly energy sources. Consequently, input cost worries moderated, thereby improving profitability margins.

“Looking ahead, as the election period draws close, we expect a sustained rise in cement demand, as the current administration aims to complete all ongoing infrastructure projects, which could drive revenue growth for cement manufacturers.

“Additionally, the expected projects that would be undertaken under the newly established Infrastructure Corporation of Nigeria Limited, a Public-Private Institution meant to provide funding for capital projects across the country, would boost cement demand. However, despite the strong and rising demand for cement, prices may become stable on the back of intensified competition and increased production capacity by industry players.

“Equally, we expect cost pressures and FX liquidity issues to persist throughout the year and this may dampen the anticipated price stability as industry players may have to pass the increased cost to consumers. Also, the recent hike in interest rates by the CBN will make borrowings more expensive and may weigh on investments in the real estate sector.

“Although the rising interest rate may affect demand, the ongoing construction activities by the public and private sectors would support cement demand through the remainder of the year.”