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Displaying items by tag: Dangote Cement
Nigerian cement producers among group of manufacturers that spent around a quarter of revenue on raw materials in 2022
19 April 2023Nigeria: Raw material costs for a group of major local manufacturers – including BUA Cement, Dangote Cement and Lafarge Africa – accounted for 24% of revenue in 2022. The increase in the cost of raw materials was driven by a shortage of foreign currency, raw material availability, logistics issues at ports and rising energy costs, according to the This Day newspaper. BUA Cement’s spending on raw materials rose by 9% year-on-year to US$54.3m in 2022, Dangote Cement’s spend grew by 12% to US$427m and Lafarge Africa’s expenditure increased by 32% to US$106m. The other companies included as part of the grouping included BUA Foods, Nestlé Nigeria, Cadbury Nigeria, Nigerian Breweries and Dangote Sugar Refinery.
2022 roundup for the cement multinationals
01 March 2023The key trends to note from the financial results of cement producers in 2022 released so far are that sales revenues are up, sales volumes of cement are mostly down and earnings have mostly dropped too. Readers are not going to be surprised that 2022 was a tough year for business as the raw materials and services inflation coming out of the coronavirus period was heightened by energy cost spikes caused by the Russian invasion of Ukraine. Producers put their prices up in response to deliver often record high annual revenues.
Graph 1: Sales revenue from selected cement producers in 2021 and 2022. Source: Company reports. Note: Figures calculated for UltraTech Cement.
What sticks out by looking at the sales volumes of cement figures in Graph 2 (below) is that Holcim’s cement sales volumes were about the same as Heidelberg Materials’ were in 2022, at around 120Mt. Remember, Holcim’s cement sales volumes were 200Mt in 2021 and 256Mt in 2015 at the time of the merger with Lafarge. Large divestments have followed with the sale to Adani Group of Holcim’s India-based companies in 2022 being one of the biggest. UltraTech Cement, meanwhile, has been steadily increasing its India-based cement production capacity.
Graph 2: Cement sales volumes from selected cement producers in 2021 and 2022. Source: Company reports. Note: Figures calculated for UltraTech Cement.
By company, Holcim’s diversification and regionalisation strategy appears to be paying off well. Reducing its exposure to the cement market is giving it a strong story to tell as it grows its light building materials division, frames this as a success in sustainability and moves out of developing markets. How well this will work if and when it ends the divestment and investment stage remains to be seen. One point to highlight is that its operating profit fell by 18% year-on-year on a like-for-like basis to US$3.43bn in 2022. As well as contending with high costs in 2022, a subsidiary connected to the group was fined US$778m by the US Department of Justice in late 2022.
Heidelberg Materials’ approach to the current economic conditions in 2022 seems to have been to keep its head down and push on for decarbonisation rather than diversifying its business. So it followed the ‘sales up, costs up but earnings down’ pattern of a few of the other cement companies covered here. Although, that said, it did diversify its name to ‘Materials’ from ‘Cement’ in September 2022.
Cemex experienced the same problems as the other companies for most of 2022 but conditions started to improve in the fourth quarter in most of its territories. In particular, it reported that earnings started to grow in Mexico towards the end of 2022 despite falling sales volumes of cement. It attributed this to its pricing strategy. Of note this week, the Mexican government is preparing to support higher levels of imports of cement into the country due to a shortage in the southeast of the country.
Buzzi Unicem, meanwhile, noticed a faster slowdown in cement deliveries in its key markets in Italy, the US and Eastern Europe in the last quarter of 2022 from a general trend that could also be seen earlier in the year. In its largest market, the US, it reported that investment in residential construction slowed. This was further affected by the growing cost of building materials and the rate of inflation, although increasing spending on infrastructure helped to keep domestic consumption stable. A favourable currency exchange rate between the US and the Euro also helped the company to report provisional earnings growth. Vicat’s US businesses in the US and Brazil helped cushion the group somewhat with a large rise in sales revenue. However, earnings in the US were hit by the costs related to the start up of the new kiln at the Ragland plant in Alabama, as well as general energy cost inflation. Its business in France fought against inflation with ‘significant’ price rises delivering a high increase in sales revenue but this was insufficient to prevent earnings from dropping.
The non-European based cement producers present a different picture. Despite the high energy costs, UltraTech Cement managed to increase its revenue and sales volumes of cement in 2022. Its net profit fell though year-on-year in the nine months to 31 December 2022. The company is targeting a cement production capacity of 159Mt/yr by around the 2025 financial year with the aim of becoming the largest cement producing company in the world outside of China. Dangote Cement managed to raise its prices at home in Nigeria to fight off inflation and hold revenue and earnings up. This was harder internationally though with supply chain disruption, high commodity prices, high freight rates and a plant shutdown in Congo blamed for holding earnings back.
Inflation and the energy markets will be clear concerns in 2023. If energy prices for industry stabilise globally then there is more of a chance for business as usual as markets cope better with higher costs. The continued dilemma for multinational cement companies remains whether to decarbonise through diversification or investment in new processes, and how far to go along either path. Meanwhile, the large regional producers are starting to show themselves outside of China, as UltraTech Cement’s growth trajectory testifies. One test for these companies is balancing the risk of expansion versus potential tighter local environmental regulations. The environmental rules of export markets are also a factor to consider here with the head of AdBri calling this week for an Australian equivalent to the European Union’s border adjustment mechanism to block so-called ‘dirty’ imports.
The next set of financial results from the cement sector in 2022 to look out for will be those from the large China-based cement producers. Once these are released we will examine them in more detail.
Dangote Cement increases revenues as cement sales drop in 2022
28 February 2023Nigeria: Dangote Cement recorded sales of US$3.49bn in 2022, up by 17% year-on-year from US$3.05bn in 2021. The producer's cement sales volumes fell by 5.1% year-on-year to 27.8Mt from 29.3Mt. Its selling and distribution costs rose by over 50% to US$643m, yet profit after tax also rose, by 4.9% to US$833m.
The Premium Times newspaper has reported that the producer invested US$543m in is subsidiaries throughout the year. The group said that most of this investment took place outside of Nigeria.
Nigeria: GE Gas Power expects to commission a new 50MW power plant at a Dangote Cement site in early 2023. The supplier said that the new power plant will provide energy for Dangote Cement's cement production and refinery operations.
The This Day newspaper has reported that the new plant is part of a total 500MW-worth of new power infrastructure which GE Gas Power expects to commission in Nigeria before July 2023.
Sinoma International Engineering signs deal with Dangote Cement to build Itori plant
01 February 2023Nigeria: China based Sinoma International Engineering has signed a US$585m contract to build an integrated cement plant at Itori in Ogun state. The plant will have two 6000t/day clinker production lines covering limestone crushing to cement packaging and shipping. The contract becomes effective once Sinoma International Engineering receives a geological survey, payment and performance guarantees and a 12% advance payment. Clinker production is scheduled for two years after the contract starts with final commissioning expected a few months later.
Dangote Cement’s Itori Cement subsidiary was established in 2016 at the same time work started on building the 6Mt/yr Okpella plant in Edo state. The Okpella plant started producing cement in 2021.
Nigeria: Dangote Cement has appointed Arvind Pathak as its Group Managing Director with effect from 1 March 2023. He will succeed Michel Puchercos, who has been in the post for three years.
Pathak holds over 30 years of experience in the cement sector. He previously worked as the managing director and chief executive officer of Birla Corporation in India. Prior to this he held two positions with Dangote Cement as Dy Group Managing Director and Group Chief Operating Officer respectively. He has also worked for Adani Enterprises and Reliance Cement. He holds an engineering degree from the Indian Institute of Technology (BHU) Varanasi and a post graduate qualification in business administration and management from the National Institute of Industrial Engineering.
CDP raises Dangote Cement’s climate rating
22 December 2022Nigeria: The CDP has raised its rating for Dangote Cement to B from B- previously. The improved score indicates that the cement producer made continued efforts to mitigate the environmental impact of its business and has improved its sustainability reporting. It is the fourth time the company has submitted data to the CDP and the second consecutive year it has improved its rating.
Michel Puchercos, the chief executive officer of Dangote Cement, said, “The CDP rating upgrade clearly illustrates the growth we have achieved in our commitment to transparency on climate and environmental issues. This year, our Alternative Fuel Project has reached an advanced stage and aims to leverage waste management solutions and reduce CO2 emissions. As of the first nine months of 2022, we co-processed 101,553t of waste representing a 77% increase over last year.”
Dangote Cement to commence 10% share buyback
14 December 2022Nigeria: Dangote Cement’s shareholders have authorised a buyback of up to 10% of the company’s issued shares.
Chair Aliko Dangote said “Over the past decade, Dangote Cement has recorded exponential growth across all areas. Group cement volumes are now at almost 30Mt/yr, our production capacity has tripled to 51.6Mt/yr and we export cement from five countries across Africa.”
Update on Ethiopia, December 2022
07 December 2022Derba MIDROC Cement signed a contract with Sinoma International Engineering in recent weeks to build a US$282m upgrade at its integrated Derba cement plant in Oromia. The move is the latest in a steady stream of projects that have been announced in Ethiopia over the last few years. Other recent developments include a deal in July 2022 by businessman Getu Gelete to buy PPC’s stake in Habesha Cement and plans in August 2022 by investor Worku Ayetenew to build a US$1bn cement plant with a production capacity of 12,000t/day. Alongside these capital intensive projects, the government has been trying to regulate the price of cement through measures such as setting fixed prices, limiting the volumes that individuals can buy and asking producers to cut distributors out of the supply chain.
To summarise some of the plant projects over the last couple of years, the Derba MIDROC Cement upgrade project intends to double the production capacity of the integrated Derba cement plant in Oromia to 15,000t/day. The other big ongoing project was announced in early 2021 when East African Holding and China-based West China Cement agreed to build a 10,000t/day plant at Lemi in Amhara Region. East African Holding is the parent company of National Cement, one of the larger producers in the country. Then in July 2021 Sinoma International Engineering’s subsidiary Suzhou Sinoma signed an initial deal with Western International Holdings, West China Cement’s international arm, to build the plant. Prime Minister Abiy Ahmed visited the construction site in March 2022 to lay the foundation stone but no commissioning date has been disclosed so far. Based on Sinoma’s assessment when it signed the contract, construction would take around 20 months, so a commissioning date by late 2023 seems reasonable. There are also a number of other projects that have been announced in the local press such as Abay Industrial Development Share Company plant at Dejen. FLSmdith said that the contract to build the 5000t/yr plant became effective in late 2020. However, not much more has been released publicly. Another project at Berenta in Amhara is also reportedly under construction.
The Global Cement Directory 2022 places the country’s production capacity at around 12Mt/yr. This compares to 15Mt/yr from 13 companies as reported by a local news source although this figure is likely to also include grinding plants. Yet the same source also placed the actual working capacity at 6Mt/yr due to old machinery and poor maintenance. As for the market in Ethiopia, Dangote Cement said that the sales from its Mugher plant rose by 1.8% year-on-year to 1.7Mt in the first nine months of 2022 and that the unit was running at full capacity in the third quarter. It reckoned that it held a 42% market share during this period, out of a total market of around 4.2Mt. Previously it said that the total market for the whole year was 7Mt in 2021.
Unfortunately it also mentioned issues with security in the region. This became a live issue this week with news that at least 30 employees of Dangote Cement were reportedly kidnapped in early December 2022 by an armed group that calls itself the Oromo Liberation Army. This is particularly sad for the company given that its country manager was shot dead in 2018. Two employees of the Mugher Cement plant were also taken hostage by the same group in October 2022 although thankfully they were later freed.
A number of projects have been announced in Ethiopia over the last few years but they appear to be taking a while to materialise. This time though a couple of the projects do seem to be on the way and the change in ownership of Habesha Cement seems to suggest a renewed vigour to the local construction market since the government opened up investment. Unfortunately, security concerns are pressing as demonstrated by what happened to some of Dangote Cement’s staff this week.
Nigeria: Dangote Cement's consolidated sales grew by 15% year-on-year to US$2.66bn during the first nine months of 2022 from US$2.31bn in the same period in 2021. In Nigeria the company recorded cement and clinker sales volumes of 13.5Mt, down by 4.7% from 14.1Mt. In the rest of Africa its cement and clinker sales were 7.37Mt, down by 9.7% from 8.16Mt. The group recorded consolidated earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$1.17bn, up by 0.2% from US$1.16bn.
Throughout the first nine months of 2022, Dangote Cement co-processed 102,000t of alternative fuel in its cement production, up by 77% year-on-year from the corresponding period of 2022.