December 3, 2024/CSL Research
In Q3 2024, the cement sector GDP growth declined significantly y/y, dropping to 2.30% in Q3 2024 from 4.20% in Q3 2023. However, q/q, growth was higher in Q3, increasing from 1.74% in Q2 2024. This deceleration in annual growth was mirrored in related sectors like real estate and construction. Specifically, real estate growth declined to 0.68% in Q3 2024, down from 1.90% in Q3 2023, while construction growth decreased to 2.91% from 3.89% over the same period in 2023. These trends underscore broader industry challenges, influenced by economic pressures, rising costs, and other macroeconomic factors.
Despite strong Revenue growth in Nigeria’s cement sector, bolstered by increased government capital expenditure (CAPEX) and heightened private-sector activity, the industry continues to grapple with the adverse effects of a challenging macroeconomic environment.
Escalating cost pressures and the persistent depreciation of the Naira have weighed heavily on the sector. In Q3 2024, key players—BUA Cement, Dangote Cement, and Lafarge Africa (WAPCO)—reported substantial foreign exchange losses totaling approximately N300.97 billion, a significant 122.32% y/y increase.
These foreign exchange losses have materially impacted profitability of some major players in the industry. BUA Cement experienced the steepest decline, with Pre-tax Profit falling 28.0% y/y to N61.76bn in 9M 2024, down from N85.75 bn in 9M 2023. Dangote Cement reported a marginal 0.4% y/y increase in Pre-tax Profit, rising to N406.39 billion in 9M 2024 from N404.89 billion in the previous year. Conversely, Lafarge Africa demonstrated resilience, leveraging its robust cash position to settle significant foreign-denominated obligations by the end of 9M 2024. This strategic move resulted in a substantial 54.2% y/y increase in Pre-Tax profit, reaching N94.33 billion, up from N61.16 billion in 9M 2023.
The outlook for the cement sector remains cautiously optimistic. We expect growth to be supported by rising cement prices and increasing demand, driven by higher government capital expenditure and robust private-sector activity. However, profitability is likely to stay pressured due to elevated raw material costs, inflation, and rising energy expenses.
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