Displaying items by tag: Dangote Cement
Many first quarter financial results for cement producers are out already and what can be seen so far deserves discussion. The first observation is that the sales revenues of Chinese companies have suffered compared to their international peers. As can be seen in Graph 1 (below) CNBM increased its sales slightly in the first quarter of 2022 but Anhui Conch and China Resources Cement (CRC) had significant falls. Stronger results from CNBM’s non-cement production subsidiaries released so far suggest that the parent company’s slow performance is likely due to the cement market. The China Cement Association has reported that national cement output dropped by 12% year-on-year to 387Mt in the first quarter of 2022. It blamed this on the latest local coronavirus wave, limited construction project funds and poor weather.
Graph 1: Sales revenues in the first quarter of 2022 from selected cement producers. Source: Company financial reports. Note: SCG data is for its building materials division only.
Outside of China sales revenue growth has been better with Holcim and Dangote Cement leading the companies presented here. Holcim attributed its success to “strong demand, acquisitions and pricing”. Demand and pricing have been familiar refrains in many of the results reports this quarter. The undertone though has been the destabilising effects upon energy prices by the ongoing war in Ukraine. Holcim’s head Jan Jenisch summed it up as navigating “challenging times, from the pandemic to geopolitical uncertainty.” The producers with operations in the Americas and Europe seem to have coped with this so far mostly due to resurgent markets. Quarterly sales revenue growth for Holcim, CRH (not shown in the graphs) and Cemex each exceeded 10% year-on-year in both of these regions.
The regionally focused companies presented here have suffered more. India-based UltraTech Cement said that its energy costs grew by 48%, with prices of petcoke and coal doubling during the period. Nigeria-based Dangote Cement reported that its group sales volumes were down 3.6% mainly due to energy supply challenges in Nigeria. Internationally, its operations relying on cement and clinker imports – in Ghana, Sierra-Leone and Cameroon – were also hit by high freight rates caused by global supply chain issues. Thailand-based SCG said that national demand for cement demand fell by 3% due to negative geopolitical effects causing inflation, a delay to the recovery of tourism and a generally subdued market.
Graph 2: Cement sales volumes in the first quarter of 2022 from selected cement producers. Source: Company financial reports.
It’s too early to read much into it but one final point is worth considering from cement sales volumes in the first quarter of 2022. They have appeared to fall for the companies that have actually released the data. The reasons for CRC in China and Dangote Cement in Sub-Saharan Africa have been covered above. Holcim’s volume decline was 2% on a like-for-like basis and the others were all very small changes.
To summarise, it’s been a good quarter for those cement producers covered here with operations in North American and Europe. Energy instability caused by the war in Ukraine so far seems to have been passed on to consumers through higher prices with no apparent ill effect. The regional producers have suffered more, with the Chinese ones having to cope with falling demand and the others finding it harder to absorb mounting energy costs and supply chain issues. Plenty more first quarter results are due from other cement companies in the next few days and weeks and it will be interesting to see whether these trends hold or if others are taking place.
Dangote Cement’s operations hit by domestic gas shortages and international freight rates
04 May 2022Nigeria: Dangote Cement sales volumes in the first quarter of 2022 have been hampered by disruptions to gas supplies domestically and by high freight rates restricting its exports of cement and clinker to Cameroon, Ghana and Sierra Leone. Its sales volumes of cement fell by 3.6% year-on-year to 7.25Mt in the first quarter of 2022 from 7.52Mt in the same period in 2021. Its revenue grew by 24% to US$994m from US$801m. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 18.6% to US$508m from US$428m.
Michael Pucheros, the chief executive officer of Dangote Cement, said “Our group volumes were down 3.6% mainly due to energy supply challenges in Nigeria. Our operations relying on cement and clinker imports – namely Ghana, Sierra-Leone, Cameroon - were impacted by the global supply chain challenges.” Additionally, its operations outside of Nigeria was also negatively affected by a cement plant in Congo being shut for over two months due to maintenance and repairs and extended power plant maintenance in Senegal.
Nigeria: Joseph Oyeyani Makoju, former managing director of Dangote Cement and advisor to Aliko Dangote, died in hospital in Abuja on 11 April 2022 whilst suffering from a heart condition. He was 73 years old, according to the Daily Independent newspaper. Makoju, an engineer by training, also served as a Special Advisor for Electrical Power under the former Nigerian President Goodluck Jonathan.
Following a career in the Nigerian power sector, Makoju worked internationally for Shell-BP, Blue Circle Cement in the UK and for West Africa Portland Cement Company (WAPCO), part of Lafarge. He joined Dangote Cement in 2009 as Special Advisor to Aliko Dangote and was subsequently promoted to chief executive officer / Group Managing Director in April 2018. He retired from the company in January 2020.
Tanzania: Dangote Cement has signed an agreement with the Tanzanian Ports Authority whereby it will ship cement from its Mtwara cement plant and raw materials for its Tanzanian operations via the Port of Mtwara. Ecofin Agency News has reported that the company previously used the road network for both materials. This had a negative impact on local roads and prevented it from exporting the Mtwara cement plant’s cement overseas.
2021 roundup for the cement multinationals
02 March 2022Cement markets have mostly recovered following the shock emergence of coronavirus in 2020. Most of the producers that have released their results so far for 2021 have reported strong boosts to sales revenue and racing earnings as something more like normality resumed. The following roundup covers a selective group of cement companies around the world.
The recovery in 2021 has made the outliers in the companies covered here noteworthy. UltraTech Cement, Semen Indonesia and Dangote Cement are all large regional companies with dominant positions domestically and varying degrees of international spread. As can be seen in Graph 1, UltraTech Cement and Dangote Cement both reported very large increases in sales, over 20% year-on-year. By contrast, Semen Indonesia sales fell very slightly.
Graph 1: Sales revenue from selected cement producers in 2020 and 2021. Source: Company reports. Note: Figures calculated for UltraTech Cement.
One reason for UltraTech Cement and Dangote Cement’s success can be seen in Graph 2 (below). Both companies managed to sell more cement in 2021. Semen Indonesia did not due to Indonesia’s production overcapacity and new competitors. It also blamed a significant rises in coal prices for a 9% drop in its earnings before interest, taxation, depreciation and amortisation (EBITDA).
UltraTech Cement has been wary of successive waves of coronavirus throughout its 2022 financial year, but generally the Indian regional markets have recovered and government-backed rural housing and infrastructure spending have supported growth. It did note rising coal prices earlier in the year, but these were reported to have somewhat softened during the quarter to 31 December 2021. It is worth noting that the ongoing war in Ukraine is affecting energy markets but more on this at the end of this article. Dangote Cement’s performance was slowed somewhat by the start of coronavirus but it has since resumed its turbo-charged trajectory with volumes, revenue and earnings growth all above 10% in 2021. Mostly this performance is supported by the Nigerian market but the company is doing well internationally too.
Graph 2: Cement sales volumes from selected cement producers in 2019 and 2020. Source: Company reports. Note: Figures calculated for UltraTech Cement.
Holcim and HeidelbergCement’s increase in sales revenue in 2021 are actually fairly similar on a like-for-like basis, both with around 10%. The former’s sales volumes were up across cement, ready-mixed concrete and aggregates in each of its regions around the world, as were sales revenue. Holcim’s big move in 2021 has been the expansion of its Solutions & Products segment with the acquisition of Firestone in April 2021. Now this has continued with the completion of the Malarkey Roofing Products purchase on 1 March 2022, a few days after it released its 2021 results. Chief executive officer Jan Jenisch described the move towards lightweight building materials as generating, “further double-digit growth engines for the company.” As an aside, it was fascinating to see CRH leave the building envelope business this week, mostly based in the US, with an agreement to sell up its division for US$3.8bn to private equity. The business CRH is divesting sells architectural glass, storefront systems, architectural glazing systems and related hardware to customers primarily in North America. CRH is clearly pursuing a different business strategy to Holcim.
HeidelbergCement has also reported a strong year in 2021 albeit without the Holcim razzle-dazzle of barging into new market areas. It noted significant increases in energy prices and pandemic‐related lockdowns in some key markets in Asia. It described a very slight cement sales volume decline in Africa and the Middle East and a drop in earnings in Asia. Its trump cards are its carbon capture projects coming down the pipeline. It’s keen to remind investors about this with the unspoken implication that it might save the company money in the future when carbon taxes bite further.
Both Cemex and Buzzi Unicem followed the growth pattern seen in sales and earnings by the other larger multinational producers covered above. Central and South American markets really took off for Cemex in 2021, starting with its home market in Mexico. However, growth was present, although slower, in both its largest markets in the US and its Europe, Middle East, Africa and Asia region. Notably cement volumes in the Philippines grew by 7% and that’s even with the devastation caused by typhoons at the end of the year taken into account. Similarly, Buzzi Unicem performed well in 2021 due to growth in Italy, the US and Eastern Europe compensating for a small sales decline in Germany. As mentioned in Update on Ukraine, February 2022 Buzzi Unicem has particular exposure to the war in Ukraine as it operates two cement plants in Ukraine and two units in Russia but this is a problem for the 2022 financial year.
To finish on Ukraine, first and foremost, a human tragedy is unfolding. Yet the war also presents many economic challenges to financial markets through sanctions and counter-actions. A recession in Russia looks likely as do energy price surges in the US and Europe leading to further inflation and, perhaps, recessions too. All this potentially lies ahead. For now, the dilemma for US and European-based cement companies and suppliers with operations in Russia is reputational. Should they continue to do business in Russia as public opinion hardens and companies like BP, Shell, Equinor, HSBC and AerCap head for the exit? The Russian government has blocked foreign companies and individuals from selling shares locally but pressure looks set to intensify for such companies to do something.
Nigeria: Dangote Cement’s revenue grew by 33.8% year-on-year to US$3.33bn in 2021 from US$2.49bn in 2020. Its sales volumes rose by 13.8% to 29.3Mt from 25.7Mt driven by a strong domestic market, although international volume growth was strong. Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 43.2% to US$1.65bn from US$1.15bn.
“Over the last two years, we have finalised the deployment of 6Mt new capacity in Nigeria. Looking ahead, we are now focused on a less capital-intensive expansion cycle, which includes building grinding plants across West and Central Africa to leverage and strengthen Dangote Cement’s regional integration. We are on track to deploy grinding capacity in Cote d’Ivoire and Ghana. In addition, our Alternative Fuel Project is at an advanced stage which aims to leverage waste management solutions, reduce CO2 emissions, and source material locally. This year, we co-processed 89,000t of waste representing a 60% increase over 2020,” said chief executive officer Michel Puchercos.
The group noted that Cement demand in Nigeria was sustained by increasing housing infrastructure, commercial construction, and government projects including major highways, roads, and railways. In May 2021 it re-started exporting clinker from its Onne and Apapa terminals and delivered seven clinker shipments with a total volume of 197,000t in 2021. It also exported 706,000t in 2021 by road to Togo and Niger. Internationally, the group said that it performed well but it also faced challenges in Cameroon, Ghana and Sierra Leone, where freight costs had increased substantially, causing volatility in the landing cost of cement and clinker.
Dangote completes second tranche of buyback
28 January 2022Nigeria: Dangote Cement announced on 26 January 2022 that it bought 126.75 million of its own shares in the week to 21 January 2022, the second tranche of a buyback programme set to return cash to shareholders. The producer, majority-owned by Africa's richest man Aliko Dangote, aims to buy back up to 10% of its US$41m share capital in tranches. The company now has 16.87 billion shares outstanding.
Aliko Dangote is Africa’s richest man….for 11th consecutive year
26 January 2022Nigeria: Aliko Dangote has retained his position as the richest man in Africa, with a net worth of US$12.1bn for the 11th consecutive year, according to Forbes’ Top 10 List of African Billionaires. The owner of Dangote Cement saw his personal wealth increase by US$1.8bn, or nearly US$5m/day, in 2021, bringing it to US$13.9bn. A major contributing factor was a 30% rise in the share price of Dangote Cement, his most valuable asset. This was due to a surge in housing developments in Nigeria and growth in government infrastructure spending in 2021.
The Forbes list also ranked Abdul Samad Rabiu as the fifth richest African. He founded and chairs Nigeria-based cement producer BUA Group.
Congo: The Société Nouvelle de Ciment du Congo (SONOCC) plans to resume production at its integrated Louteté plant in Bouenza from 31 January 2022. Plant manager II Xingtao made the announcement during a meeting with Antoine Thomas Nicéphore Fylla Saint Eudes, the Minister of Industrial Development and Promotion of the Private Sector, according to the Central African News Agency.
The minister called for the meeting because reportedly only one of the country’s integrated cement plants, FORSPAK Cement, is currently operational. SONOCC blamed the situation on a mechanical breakdown, the coronavirus pandemic and the slow arrival of an order from France. II Xingtao said that SONOCC was hoping to use limestone from Dangote Cement’s plant at Mfila to help alleviate the situation.
Dangote Cement estimated in October 2021 that the total market for cement in Congo was around 667,000t in the first nine months of the year. Its 1.5Mt/yr integrated plant in Mfila sold 357,000t of cement during the period, a rise of 33% year-on-year.
Dangote Cement to buy back further 1% of its shares
12 January 2022Nigeria: Dangote Cement plans to buy back 1% of its issued shares under its on-going share buyback programme. The Business Post newspaper has reported that the group launched the first tranche of the programme in 2020. At that time, it bought back 0.2% of its shares. Dangote Cement will make the currently planned purchase when the second tranche commences on 19 January 2022.