Cement giants drop profits in Q1 on cash-strapped policy

DESPITE increases in total sales figures for the first quarter (Q1) of this year relative to the prior period, the profit lines of the three giant cement manufacturing companies in Nigeria seesawed on the back of the naira redesign policy of the Central Bank of Nigeria (CBN).

A check by The ICIR on the unaudited financial results of Dangote Cement Plc, BUA Cement Plc, and Lafarge Africa Plc for the three months ended March 31, 2023, showed that their gross profit, operating profit, profit before tax or pre-tax profit and profit after tax or net profit varied in the review period.

The CBN had on October 26, 2022 revealed plans to redesign, produce, and circulate new series of N200, N500 and N1,000 notes. Inaugurated on November 23, 2022, by the President, the notes officially came into circulation on December 15, 2022.

And as part of the implementation plans, the apex bank oughted to phase out the old notes under a tight deadline of January 31, but further extended the deadline to February 10, after the move was greeted with public outcry. 

Bag of cement from Dangote, Lafarge and BUA.
Bag of cement from Dangote, Lafarge and BUA.

But when it became obvious that the previous date was not.longer tenable, the apex bank further extended the validity of only the old N200 note to April 10, and reluctantly obeyed the verdict of the Supreme Court that the old notes should remain legal till December 31.

The much ado about the implementation of the policy and the cash-strapped saga that followed virtually affected every businesses and grounded the economy to a halt, The ICIR reported.

“Q1 2023 was a challenging first quarter due to the economic impact of the general elections and shortage of cash in circulation following the currency redesign policy,” Khaled El Dokani, the chief executive officer of Lafarge Africa, lamented.

According to the Lafarge Africa boss, these factors constrained the company’s financial performance in the review period, however, the company remains focused on delivering sustainable value to all stakeholders as market recovers post-election and through the rest of the year.

Analysis by The ICIR showed that Lafarge Africa’s sales rose by 1.34 per cent to N91.82 billion; gross profit by 10.21 per cent to N46.48 billion; operating profit by 0.81 per cent to N22.24 billion; and pre-tax by 4.72 per cent to N22.48 billion.

However, the company’s net profit dropped by 14.94 per cent to N14.94 billion in Q1 2023 compared to N17.56 billion in Q1 2022.

Lafarge Africa’s Q1 performance. Source: Unaudited financial result for the three months ended March 31, 2023 as posted by the company

A member of the global leader in innovative and sustainable building solutions, Lafarge Africa specialises in cement, construction aggregates, and concrete.

In the period under review, while BUA Cement reported a sales growth of 9.65 per cent to N106.35 billion, gross profit was upped by 4.52 per cent to N50.38 billion, however, the company’s operating profit fell by 9.43 per cent to N38.38 billion, pre-tax profit  by 15.57 per cent to N35.46 billion and net profit by 19.13 per cent to N26.80 billion.

BUA Cement’s Q1 performance. Source: Unaudited financial result for the three months ended March 31, 2023 as posted by the company

BUA Cement is a $1 billion investment of BUA Group primarily engaged in the business of quarrying, extracting, processing and dealing in limestone as well as the manufacture and supply of cement. 

The big elephant in the room, Dangote Cement, marginally reported a 3.45 per cent rise in net profit to N109.50 billion in Q1 2023 while all other profit lines including sales dropped in Q1 relative to Q1 2022.

The company’s sales fell by 1.56 per cent to N406.72 billion; gross profit by 6.18 per cent to N243.05 billion; operating profit by 14.19 per cent to N156.87 billion; and pre-tax by 6.12 per cent to N146.82 billion.

However, the company posted a 3.45 per cent growth in N109.50 billion in Q1 2023 from N105.85 billion in Q1 2022.

    Dangote Cement’s Q1 performance. Source: Unaudited financial result for the three months ended March 31, 2023 as posted by the company

    According to Dangote Cement, gas supply and currency weakening were some of the challenges the business faced.

    “Faced with a high inflationary environment and weaker demand, Dangote Cement Plc deployed new and innovative business strategies that helped to drive up revenues, contain costs and protect margins.

    “With the significant rise in diesel and gas prices, we opted for the aggressive use of cheaper Alternative Fuels (AF) in the production of cement, through the co-processing of wastes such as: agro wastes, waste lubricants, tyre derived fuels, sawdust, and packaging materials,” the company stated.

    Dangote Cement is sub-Saharan Africa’s leading cement company with a production capacity of 48.6 million tonnes per year across ten countries.


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