Amidst country-wide macroeconomic headwinds, Dangote Cement, Africa's largest cement manufacturer, has reported its 2023 first-quarter results, which show a decline in volumes.
In comparison to the same period in 2022, when revenues were N321.9 billion, the company reported a decline to N280.3 billion in the first three months of 2023. The cement giant's quarter-over-quarter sales decrease is the first in five years, illustrative of the negative impact poor government policies can have on firms.
This report is courtesy of Nairamterics, a Nigerian business publication.
On the strength of expenditure on infrastructure and building, Dangote Cement has consistently produced revenue growth from quarter to quarter and year to year. Since 2019, the first quarter of each year has seen five straight quarters of sales growth for Dangote Cement.
However, domestic problems like a cash crunch and a tumultuous election slowed down infrastructure spending. Nigeria's central bank implemented policies in late December with the intention of issuing new naira notes and lowering cash withdrawal thresholds. The outcome was a devastating shock to the financial system that had an impact on businesses that primarily rely on cash to distribute goods. One of these was Dangote Cement.
Dangote Cement sales by Nigerian operations fell by 24.6% in the first quarter of 2023 from the 4.8Mt sold in Q1 2022 to 3.6Mt. Approximately 58% of the group volumes shipped are to the Nigerian market, down from 66.7% during the same period in 2022. Additionally, 69% of the group's revenues came from operations in Nigeria, down from 78% during the same period last year.
In addition, the group's overall manufacturing costs increased to N163.6 billion from N154.1 billion during the same time in 2022, while administrative costs increased 12.5% to N87.3 billion.
The company ascribed the 6.2% increase in production costs to trends in inflation, but the increase in administrative costs was brought on by higher haulage costs and AGO costs. Devaluation was mentioned as another source of cost pressure.
Overall, the company's Ebitda decreased from N211 billion to N185.7 billion, resulting in a 45.7% decrease in Ebitda margin compared to the same time in 2023. In addition, the group's overall manufacturing costs increased to N163.6 billion from N154.1 billion during the same time in 2022, while administrative costs increased 12.5% to N87.3 billion.
The company ascribed the 6.2% increase in production costs to trends in inflation, but the increase in administrative costs was brought on by higher haulage costs and AGO costs. Devaluation was mentioned as another source of cost pressure.
Overall, the company's Ebitda decreased from N211 billion to N185.7 billion, resulting in a 45.7% decrease in Ebitda margin compared to the same time in 2022.
“The cash crunch coupled with the uncertainty around the general elections led to a slowdown in key private and public infrastructure investments. Consequently, our Nigerian operations recorded a drop in volume, resulting in a 13.5% decline in Group volume,” the CEO of Dangote Cement Arvind Pathak stated.
“In fulfilling our commitment to creating additional value for our shareholders, we have received regulatory approval for our second buyback program. We will continue to monitor the evolving business environment and market conditions, in making decisions on tranches of the share buy-back program,” the CEO added.
Dangote Cement claimed that despite the difficulties, it has continued to identify potential because of the nation's growing need for cement. This has accelerated their efforts to raise their local capacity in Nigeria from 35.25Mta to 41.25Mta.