By Alex C
Dangote Cement Plc, Nigeria’s largest cement producer, has increased cement volumes in the country by 4.2% to nearly 3.5 million tonnes in the first three months ended 31 March 2014. While total Nigerian cement market grew by 1.3% to nearly 5.5million tonnes, Dangote Cement’s market share is about 63%, which is consistent to the average market share achieved across 2013.
The Q1 2014 unaudited results reveal that the Consolidated Group revenue grew by 8.5% to ₦103.6billion(Q1 2013: ₦95.4bn) reflecting higher sales in Nigeria and an increase in the ex-factory price of cement of approximately 10% at the beginning of March 2014.
With the start of operations at Sephaku Cement’s Delmas grinding plant in South Africa, the subsidiary contributed ₦0.8bn in revenue, up from ₦0.1bn in Q1 2013, as Nigerian revenues rose 8.1% to ₦99.8bn. Dangote Cement Ghana contributed nearly ₦3.0bn of revenue, the same as in Q1 2013.
At Group level, gross profits rose by just 0.7% to ₦66.5 as both the Ibese and Obajana plants felt the impact of gas disruption and shortages of the more expensive LPFO used as a back-up fuel. While gross margins suffered as a result and the 64.2% achieved in Q1 2014 compared to the 69.2% achieved in the same period in 2013, it was substantially higher than the 55.8% reported in the final quarter of 2013.
The change in output mix in the first quarter, which saw a higher proportion of sales from LPFO-fueled Gboko, also led to an increase in production costs. Total operating expenses rose by 13.0% to ₦11.9bn, mostly as a result of a wage increase implemented last year, as well as costs associated with new IT projects to help improve efficiency.
Furthermore, distribution costs increased due to higher level of direct-to-customer deliveries and higher depreciation associated with the larger fleet needed to support them. The Group posted an operating profit of nearly ₦54. 6bn, slightly down on the previous year and giving an operating margin of 52.7% (Q1 2013: ₦55.5bn, 58.1% margin).
Operating profit in Nigerian operations was broadly flat at ₦55.6 bn. The Group’s Profit Before Tax (PBT) fell By 1.2 % to ₦53.0bn (Q1 201: ₦53.7bn). With profits on operations at Obajana (Lines 1+2) and Gboko now exposed to taxation, the Group had a tax charge of ₦5.4bn (Q1 2013: credit of ₦0.05bn) to leave profit for the year lower by 11.4% at ₦47.6bn. As a result, earnings per share were lower by 11.4% at ₦2.80 per share
D.V.G Edwin, Chief Executive, Dangote Cement said that despite the increase in revenue and production over the same quarter last year, the national gas infrastructure affected the company’s ability to supply the growing demand for cement across Nigeria.
The Chief Executive pointed out that it expects the gas infrastructure problems will be resolved so that normal supplies can be resumed.
“We are commissioning coal mills at our Ibese and Obajana plants to reduce our need for furnace oil as a back-up p fuel. We are committed to giving Nigeria’s builders the best possible products and that is why we have launched our new 3x brand of cement, which delivers the necessary strength for most types of building work. We are confident the market will recognise its superior qualities, compared to other brands available in Nigeria. In addition, we have also launched a new product d esigned for the heavy, load-bearing structures that will form part of Nigeria’s infrastructure.
“We have begun operations at our Delmas grinding plant, in South Africa, and expect to open our plant in Senegal in the coming weeks. These new plants are the first phase of our expansion as we aim to become Africa’s leading cement producer,” Edwin concluded.
A peep into Dangote Cement shows production capacity of 20.25 million tonnes in Nigeria as new operations is set to come on stream various parts of Sub-Saharan Africa.
The Group plans to have around 60 million tonnes of production, grinding and import capacity in Sub-Saharan Africa by 2016
Dangote Cement’s Obajana plant in Kogi State, which is the largest facility in Africa has production capacity of 10.25mta capacity across three lines and a further 3 mta capacity currently being built. The new 6 Mta Ibese plant in Ogun state, near the key market of Lagos, was inaugurated in February 2012.
Dangote Cement is investing several billion dollars to build manufacturing plants and import terminals across Africa. Current plans are for integrated or grinding plants in Cameroon, Ethiopia, Republic of Congo, Liberia, Senegal, South Africa, Tanzania, Kenya and Zambia, as well as Ivory Coast and Ghana, and import/packing facilities in Ghana and Sierra Leone.
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