November 5, 2024/CSL Research

In the first nine months of 2024, the Nigerian cement industry experienced remarkable topline growth, with the total Revenue of all listed players surging by 69.36% y/y to N3.62 trillion, compared to N2.14 trillion in the same period of 2023. The robust Revenue growth was driven by both price and volume increases. Dangote Cement, the industry leader, played a pivotal role in this growth, with its Revenue climbing 69.1% to N2.56 trillion in 9M 2024, up from N1.51 trillion in 9M 2023. This remarkable growth underscores Dangote Cement’s dominant position in the market.

BUA Cement, the second-largest producer in Nigeria, also showed strong topline growth, with Revenue rising 73.7% y/y to ₦583.41 billion in 9M 2024, up from ₦335.86 billion in 9M 2023. Similarly, Lafarge Africa recorded a substantial 65.9% Revenue increase, reaching ₦479.50 billion in 9M 2024, compared to ₦289.08 billion in the previous year. The Revenue growth among cement producers reflects an overall increase in demand for cement, driven by heightened capital expenditure (CAPEX) and expanded private-sector activities. With the government’s ongoing infrastructure projects, demand for cement is expected to remain strong, supporting further growth in the industry.

Despite strong demand, the Nigerian cement sector encountered substantial challenges in the period under review due to macroeconomic pressures, particularly high inflation and Naira depreciation. The sector’s Cost of Goods Sold (excluding depreciation) surged by 98.29% y/y to ₦1.73 trillion in 9M 2024, up from ₦873.13 billion in the same period of 2023, largely due to soaring input costs. Operating Expenses (excluding depreciation) also rose sharply, increasing by 76.81% y/y to ₦729.77 billion, up from ₦412.73 billion in 9M 2023, as inflationary pressures impacted operational costs. The Naira’s depreciation compounded these challenges, resulting in significant foreign exchange (FX) losses for the three listed cement companies, which totalled ₦300.97 billion—a 122.32% y/y increase.

Despite the impact of rising OPEX and FX losses, the sector showed resilience, with two of the three major players recording growth in Pre-tax Profit. Lafarge Africa reported a notable 54.2% increase in Pre-tax Profit, reaching N94.33 billion, while Dangote Cement achieved a marginal rise of 0.4% y/y, to N406.39 billion. Conversely, BUA Cement saw a significant decline in Pre-tax Profit, falling 28.0% y/y to N61.76 billion, driven by significant OPEX and FX losses witnessed in the period. Lafarge Africa’s ability to reduce a substantial portion of its FX-denominated obligations contributed to its robust pre-tax profit growth.

Looking ahead, Revenue growth for cement companies is expected to remain strong, primarily driven by increased sales volumes amid rising cement demand. Additionally, cement prices are likely to continue reflecting prevailing macroeconomic conditions, providing further support for revenue growth in the industry. Sustained revenue expansion will be crucial for preserving healthy profit margins, especially as Operating Expenses (OPEX) and Foreign Exchange (FX) pressures persist.