May 19, 2025/Cordros Report
In this report, we update our views on Nigeria’s industrial goods (cement) sector. We believe the sector is positioned for solid growth in 2025E, supported by resilient demand, pricing strength, improved cost dynamics, and a more stable macroeconomic backdrop. Operators are set to benefit from sustained construction and infrastructure activity, with additional support from relative currency stability and stronger operational efficiency. While risks around fiscal policy execution and regulatory oversight persist, we believe the sector is transitioning into a more stable and fundamentally driven phase. Across our coverage, we maintain a “BUY” rating for Lafarge Africa Plc (WAPCO; NGN104.71/share), supported by (1) a strong revenue outlook, (2) anticipated EBITDA margin expansion, (3) low leverage, and (4) a healthy balance sheet. Meanwhile, we upgrade Dangote Cement Plc (DANGCEM; NGN542.98/share) to a “BUY” rating, reflecting our expectations for EBITDA margin expansion, a decline in FX losses and earnings acceleration. Lastly, we upgrade BUA Cement Plc (BUACEMENT; NGN75.87/share) from “SELL” to “HOLD” given expectations of subdued cost growth, EBITDA margin expansion, and lower FX losses.
Resilient demand and pricing upside to drive top-line expansion
We anticipate an uptick in cement volumes in 2025E, driven by increased government infrastructure spending and a gradual recovery in private real estate investment. The implementation of public-private partnership (PPP) frameworks for major road and infrastructure projects is expected to enhance execution with a positive ripple effect on demand. Additionally, the 69.9% y/y increase in the FG’s capex to NGN23.40 trillion (with NGN5.99 trillion earmarked for infrastructure), alongside expanded infrastructure budgets at the sub-national level, underpins our positive outlook for cement demand in 2025E. As such, we project sales volume to grow collectively by 7.0% y/y to 33.94 million tonnes per annum – Mtpa (WAPCO: +27.1% y/y to 6.41 Mtpa | DANGCEM: +1.8% y/y to 18.00 Mtpa | BUACEMENT: +12.9% y/y to 9.53 Mtpa). Meanwhile, average cement price/t is expected to rise by c.24.0% y/y in 2025E (vs. 54.4% y/y in 2024), providing additional support to revenue growth. Thus, we estimate revenue growth of 40.7% y/y for WAPCO, 21.4% y/y for DANGCEM, and 40.6% y/y for BUACEMENT in 2025E.
Robust EPS outlook on margin gains and cost efficiencies
We expect earnings growth to outpace revenue in 2025E, supported by cost optimisation initiatives (i.e. increased use of alternative fuels, local raw material sourcing, adoption of CNG trucks, and process automation) as well as a more stable FX environment. These measures are expected to moderate growth in both COGS and OPEX, thereby supporting gross and EBITDA margins expansion across all listed players. As a result, we forecast strong EPS growth for WAPCO (+110.0% y/y to NGN13.06), DANGCEM (+80.3% y/y to NGN53.61), and BUACEMENT (+295.9% y/y to NGN8.64) in 2025E.
Positive sector outlook anchored by fundamental tailwinds
Our investment case for Nigeria’s cement sector is anchored on (1) resilient infrastructure-led demand, supported by federal and subnational capex commitments, greater adoption of concrete technology, and private-sector construction growth, (2) strong pricing momentum, with double-digit price growth expected to support revenue expansion, (3) easing cost pressures and enhanced efficiency gains from moderating energy costs and fuel substitution efforts, and (4) relative currency stability and low FCY debt exposure, expected to significantly reduce FX-related losses. The combination of these drivers points to a positive outlook for the sector in 2025E. While risks around fiscal policy execution and regulatory interventions persist, we believe the positive tailwinds significantly outweigh the headwinds, hence our bullish stance.
