Tuesday, 24 October 2017

Dangote rakes in 93% of Nigerian Cement profits

Nigeria’s 3 largest cement companies made a total profit of N207 billion as at the 3rd quarter of 2017. Of this sum. Dangote Cement was responsible for 93% of the industry’s entire profit.

Dangote Cement which is Nigeria’s largest cement company by production volume made N193 billion in profits for the period ended September 2017, a 45% increase compared to N133 billion made the prior year. Lafarge Africa made N13.4 billion for the period ended September 2017, an improvement from the N40 billion loss made the corresponding period in the prior year. Sokoto Cement also known as (Cement Company of Northern Nigeria) had the biggest jump in profits. The company’s profit after tax jumped massively by 175% from N727 million in 2016 to N2 billion in 2017.

Key Drivers of the profit

All 3 cement companies recorded increased revenues. A superficial observation of industry trends show that the cement sector may be in line to benefit from the government’s focus on infrastructure spending. Large scale capital projects like the rehabilitation of roads, bridges and buildings tend to favour cement and construction firms.

Dangote Cement’s revenues increased by 36.4% from N442 billion in 2016 to N603 billion in 2017. We are led to understand that Dangote Cement may have increased its cement prices rather than reduce it, as the company’s profits soared despite a drop in production and sales volumes. 

Dangote’s production volumes dropped by 10.69% from 17.6 million tonnes in 2016 to 15.9 million tonnes in 2017. Sales volumes also dropped by 11.8% from 18.5million tonnes in 2016 to 16.3 million tonnes in 2017. The company however attributed it to the drop in sales volume to the raining season, when construction typically slows.

Lafarge Africa and Sokoto Cement Plc did not state their production volumes for the period, but had increased revenues. Lafarge Africa’s revenues were up 38.2% from N161 billion in 2016 to N223 billion in 2017. Sokoto Cement had a 41.3% increase in revenues from N9.2 billion in 2016 to N13 billion in 2017.

Dangote Cement thus made 71% of the N839 billion made as revenues by the country’s largest cement companies for the 9 months ended September 2017.

Earnings Per Share is also up

Dangote Cement’s earnings per share increased by 38% from N8.13 in 2016 to N11.30 in 2017 and Sokoto Cement’s Earnings Per Share jumped massively by 184% from 57 kobo in 2016 to N1.62 in 2017. Lafarge’s Earnings per Share was the smallest at 10 kobo per share is a huge jump from the loss per share of N8.27 the company made in 2016.

Current share price may already reflect these gains

The general positive market sentiments mean investors may have already priced in the gains. Year to date, Sokoto Cement shares are up 103.40%. Lafarge Africa shares are up 36.75% year to date. Dangote Cement shares are also up 26.44%.


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