Q1 2023 results of listed cement companies – Dangote Cement
Q1 2023 results of listed cement companies – Dangote Cement `; The financial results of the three cement manufacturing companies in Nigeria -Lafarge Africa Plc, Dangote Cement and Bua Cement can give an indication of the health or otherwise of the construction sector. Over the next few pages, we present these results with commentary from stockbroking firms .
Dangote Cement Q1 2023 Unaudited results
In this article we publish the direct commentary on the results by the company itself: In a statement released by the company: “Macroeconomic Outlook”
The recent bouts of banking instability have shown that the global economy is still fragile, and yet to fully recover from the multi-year shocks. Hence, due to persistent high inflation and recent financial sector turmoil, IMF estimates global growth will slow to 2.8% in 2023, down from the 3.4% seen in 2022.
Likewise, in sub-Saharan Africa (SSA) the confluence of insistent global inflation, elevated sovereign debt spreads and tighter monetary policies have led to higher borrowing costs and have placed greater pressure on exchange rates. Given this challenging environment, the region’s growth will decline to 3.6% in 2023 from 3.9% in 2022 following the strong rebound of 2021, according to the IMF.
However, for our cement operations, we saw a strong demand in pan-Africa as we proactively implemented a robust cost reduction strategy and a performance improvement plan across the Group. These initiatives enabled us to manage our costs efficiently and deliver strong results despite the weak macroeconomic environment.
Analysis of Dangote Cement Plc reports by stockbroking firm
Nigeria Region
In our financial reporting, the Nigerian region includes Dangote Cement Plc (‘the company’) which has plants in Obajana, Ibese and Gboko; DCP Cement Ltd with a 3Mt plant in Obajana; and Okpella Cement Plc’s 3Mt plant.
The uncertainty and sentiments around the Nigerian elections, stalled economic activities with many private and public projects on hold, until the outcome of the elections. Collectively, this negatively impacted volume of cement sales and limited our ability to maximize production during the period.
Based on historical trends, we expect a rebound in cement demand in the second half of the year following the change in Government. That said, the IMF expects Nigeria to grow at 3.2% in 2023, down slightly from 3.3% in 2022. Nigeria’s growth outlook is buoyed by higher oil prices and buoyant consumption activities.
Our Nigerian operations sold 3.6Mt of cement in the first quarter of 2023, down 24.6% from the 4.8Mt sold in Q1 2023. The decline in volume was due to cash crunch and negative sentiments around the elections. The cash unavailability impacted construction workers daily wages and retailers’ ability to pay for cement in cash.
Revenues for the Nigerian operations declined by 12.9% to ₦280.3B, due to the uncertainties during the period. The increased prices of Automotive Gas Oil (AGO) resulted in a 7.9% year on year increase in selling and distribution cost. Accordingly, EBITDA of our Nigerian operations was down 19.3% to ₦158.6bn, at a margin of 56.6%, excluding central costs and eliminations (Q1 2022: ₦196.5bn, 61.1%).
We continue to build on our cost reduction strategy amid the high operating cost environment. This cost containment measures involves the use of alternative fuel (AF) to improve our energy mix, efficiencies in our plant operations, and the use of Compressed Natural Gas (CNG) for our trucks.
Opportunities abound for cement demand in the Nigerian market, and to meet the increasing demand we are strengthening our local production capacity efforts with the announcement of the construction of an additional 6Mta cement plant in Itori, Ogun state. Once completed, our local capacity in Nigeria will increase to 41.25Mta.”