May 3, 2024/CSL Research
In Q1 2024, cement players witnessed significant topline growth, with a y/y increase of 84.54% to N1.12 trillion compared to N604.90 billion in Q1 2023. The robust revenue growth was primarily driven by both price and volume increases. Specifically, Dangote Cement, the leading cement manufacturer in the country, played a pivotal role in driving the industry’s overall growth. The company’s revenue surged by 101.0% to N817.35 billion in Q1 2024 from N406.72 billion in Q1 2023. This remarkable growth underscores Dangote Cement’s dominant position in the market.
BUA Cement, the second-largest cement maker in Nigeria, also reported impressive performance with revenue growth of 51.5% year-on-year to N161.13 billion in Q1 2024 from N106.35 billion in Q1 2023. Likewise, Lafarge Africa recorded a substantial revenue growth of 50% year-on-year, reaching N137.77 billion in Q1 2024 compared to N91.82 billion in Q1 2023. The growth in the cement players’ revenues indicates an increase in the overall demand for cement.
The surge in demand for cement can be attributed to increased capital expenditure (CAPEX) and private-sector activities. As the government continues to carry out infrastructural development projects, the demand for cement is expected to remain robust, driving further growth in the industry.
Despite a surge in demand during the quarter, the cement sector faced significant challenges due to macroeconomic issues, notably the depreciation of the Naira. This resulted in considerable foreign exchange losses for the industry’s key players—BUA Cement, Dangote Cement, and WAPCO (Lafarge)—amounting to approximately N95.62 billion, marking a significant 1133.13% y/y increase. These FX losses had a notable impact on the financial performance of the companies, with two out of the three experiencing a decline in pre-tax profits. WAPCO saw a significant decrease of 61.3% to N8.71 billion, while BUA Cement recorded a 40% year-on-year drop to N21.29 billion.
In contrast, Dangote Cement managed to report a pre-tax profit of N166.40 billion, marking a 13.3% increase from the previous year. Dangote Cement’s robust performance can be attributed to its triple-digit revenue growth during the period, which bolstered its bottom-line figures. Despite the sector-wide challenges, Dangote Cement’s strategic positioning and revenue diversification strategies enabled it to weather the storm better than its competitors.
Moving forward, we anticipate that revenue growth for cement players will remain robust, primarily fueled by strong sales volumes driven by increased cement demand. Additionally, cement prices are expected to continue reflecting current macroeconomic conditions, further boosting revenue growth for industry players. This sustained revenue growth is essential for maintaining healthy bottom lines for cement players, especially as operational expenditure (OPEX) and foreign exchange (FX) pressures continue to rise. It’s crucial for cement players to implement proactive measures to manage FX risk and enhance operational resilience to sustain profitability amidst volatile economic conditions.
