Dangote Cement reports on strong 2013

Dangote Cement has reported its full year results for FY13, which show another impressive year of growth for the Nigerian company. Consolidated group revenue increased by 29.4% to N386.2 billion (US$2.45 billion), while gross profits were up 35.3% to N243.7 billion and EBITDA rose 31.9% to N229.6 billion.

Nigeria’s cement market grew by an estimated 15.6% to nearly 21.2 million t in 2013. Just 1.1 million t of cement was imported, reduced from 1.9 million t in 2012. Currently, per capita consumption is estimated at 126 kg. Dangote Cement believes the Nigerian economy is capable of sustaining a much higher per-capita consumption, as are the neighbouring countries in West Africa. This is driving the group’s investment in Nigeria to satisfy domestic and regional demand.

Fuel supply issues

Gas supply has traditionally been an obstacle to operations in Nigeria. In 2013, supplies to the Ibese plant were good, though the Obajana plant still experienced some problems due to upgrade work on pipes and equipment. Dangote Cement anticipates that once the upgrade work has been completed, gas supply to Obajana will be much improved.

In addition, Dangote is developing alternatives. Coal mills are being commissioned at Ibese and at Obajana line 3 and parent company Dangote Industries is considering the acquisition of oil and gas assets.

Nigerian operations

In total, Dangote Cement sold 13.3 million t of cement in Nigeria last year, a 28.2% increase from the previous year. This is substantially ahead of the 15.6% growth in the market as a whole. The group estimates its market share at 62.8% for the year, attributing increased demand for direct delivery to customers as being, in part, responsible for its success.

• The Obajana plant increased sales by 37.2% to almost 7.9 million t in 2013.
• The Ibese plant sold 4 million t of cement over the year, up 40.4%.
• After a brief shutdown period, the Gboko plant was reopened at the end of January 2013 and sold 1.4 million t of cement through the year. This plant is fuelled by LPFO and diesel so is not affected by gas supply problems. Higher capacity grinding mills were commissioned in the second half of the year.

Operations overseas

• Dangote Cement Ghana Ltd contributed revenue of N14.1 billion in 2013 from sales of 709 806 t of cement.
• Sephaku Cement contributed nearly N0.6 billion from sales of flyash. Cement production had not begun during the reporting period, though production at the Delmas grinding plant commenced in January 2014. The fully integrated cement plant in Lichtenburg is scheduled to enter production by mid-2014.
• In Senegal, legal issues (which have since been resolved) delayed the opening of Dangote Cement’s new plant. Operations are expected to begin within the first half of 2014.
• The 2.5 million t plant in Mugher, Ethiopia, is scheduled to begin operations towards the end of this year.
• Work has begun on the 3 million tpa plant in Mtwara, Tanzania, which should be operational by the end of 2015.
• In Zambia, work is underway on the 1.5 million tpa plant at Ndola and cement production is expected to begin in the second half of this year.
• Plans for a 1.5 million tpa plant in Kenya are being reviewed as the group considers increasing the scale of the project to 3 million tpa.
• Plans for a new plant in South Sudan have been put on hold due to the unfavourable political situation.
• Work is progressing on the 1.5 million tpa plant in Cameroon. Completion is expected within the first half of this year.
• A 1.5 million tpa plant in Congo is due to open in 2016.
• Import and grinding facilities are planned along the coast of West Africa.
• Work in Sierra Leone has been delayed, pushing the start date to the fourth quarter of this year.
• A planned import terminal in Liberia is being reviewed as the group considers whether a grinding facility would be a more attractive investment.

Outlook

Trading remains robust in Nigeria. In the medium term, the group expects the Nigerian market to continue growing to the point that other manufacturers find they need to add capacity to keep up with demand. As Dangote is adding 9 million t of capacity by the end of this year, the group believes it is in a strong position to meet the demand where others cannot.

Dangote Cement has embarked on an initiative to improve the standard of cement sold in Nigeria, having stated their belief that 42.5-strength cement is the most appropriate for general use. The group has recently announced the availability of 52.5-strength cement, suited to heavy load-bearing structures such as bridges and flyovers.

Chief Executive comment

D.V.G. Edwin, Chief Executive, said: “Dangote Cement made excellent progress in 2013…Our direct-delivery strategy is proving very popular with customers and I am pleased to report that direct-to-customer deliveries now account for more than half our sales.

“We increased our margins despite continuing disruption to our gas supply and believe that the gas distribution infrastructure will be more robust in 2014, enabling us to improve our margins even further. At the same time we are looking at ways to diversify our fuel supplies to mitigate the impact of any future disruption and reduce the cost of using alternative fuels to gas.

“Our financial strength has allowed us to increase our dividend by 133% to N7.0 per share and the coming year will see our new factories opening across Africa as we begin to deliver on our promise to become Africa’s leading cement producer, generating strong and sustainable returns for our shareholders.”

Adapted from press release by Katherine Guenioui

Read the article online at: https://www.worldcement.com/africa-middle-east/28032014/dangote_cement_releases_2013_results_962/