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Dangote Cement scores big increases in profits

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World Cement,


Dangote Cement has issued its interim report for the nine months to the end of September. Consolidated group revenue was up 28.7% at N289 billion, while gross profits increased 39.4% to N189.4 billion (65.5% margin). EBITDA rose 35.9% to N181.1 billion, and pretax profit also rose to N151.7 billion, a 42.6% increase.

Nigerian cement industry

The Nigerian cement industry continues to improve as GDP growth and government-led infrastructure projects continue to drive demand. Cement demand grew by 13.6% from January – September to almost 16 million t. Dangote Cement has approximately a 63% market share with 20.25 million t production capacity, and sold 9.95 million t over the nine-month period.

Dangote has three plants in Nigeria: Obajana, Ibese and Gboko. The Obajana plant has struggled with its energy supply. Natural gas utilisation fell to 67% in 3Q13 as ramped up power generation at privatised power stations increased their offtake of gas from the same pipelines that feed the Obajana plant. Dangote Cement is in active discussions with potential new suppliers. Meanwhile, the company has begun construction of a coal mill for Obajana line 3 and has already built a coal mill at the Ibese plant. The company believes coal offers a cheaper alternative to LPFO and will bring greater control in terms of supply. The Ibese plant sold more than 3.04 million t of cement in the first nine months of the year – a 46.8% increase y/y. This plant has not experienced the same issues with gas supply and has been operating at a capacity utilisation rate of 68%.

The Gboko plant was closed in December 2012 and reopened in January. Production is down this year, but a new grinding plant is being installed that should boost capacity by up to 1 million tpa.

In general, cement imports to Nigeria have fallen away to an estimated 820 000 t, down from the 1.66 million t imported last year.

Expansion into foreign cement markets

Dangote Cement has announced an investment of more than US$3.4 billion to build cement plants and import terminals across Africa.

  • In Ghana, GreenView International contributed N11.3 billion in revenue in the first nine months of the year from sales of 543 000 t of cement.
  • Sephaku Cement in South Africa is yet to begin operations, but has thus far generated N0.5 billion in revenues from sales of flyash. The 1.4 million t Delmas grinding plant will commence production in January, while the Lichtenburg cement plant, with clinker production capacity of 6000 tpd and cement production capacity of 1.1 million tpa, is due to come online in mid-2014.
  • Legal issues over the land the Senegal plant is on have been resolved, leaving Dangote Cement free to resume project work and normal operations there.
  • Work is underway on the 2.5 million tpa plant in Mugher, Ethiopia, which is scheduled to enter production in early 2015.
  • The 3 million tpa gas-fired plant in Mtwara, Tanzania, is due to begin operations in October 2015.
  • Work is also ongoing at the Ndola plant in Zambia. This 1.5 million tpa plant is due to begin cement production in mid-2014.
  • A 1.5 million tpa grinding plant in Cameroon is to be completed in 1H14. Work is currently underway.
  • In Congo, the company is planning an integrated cement plant of 1.5 million t capacity to begin production in 2Q16.
  • Further plans for a 1.5 million tpa plant in South Sudan and another in Kenya have been announced. Meanwhile, various import facilities are also planned along the coast of West Africa with the intention that these are served by Dangote Cement’s Nigerian cement plants.

Outlook

As per capita cement demand in Nigeria is well below average, the company anticipates continued growth in this market. It is forecasting revenue of N102.4 billion in 4Q13, operating profit of N54.7 billion and pre-tax profit of N53.3 billion.

D.V.G. Edwin, Chief Executive, commented: “Demand for cement remains strong in Nigeria and with our sales nearly 30% higher than last year, Dangote Cement has grown at twice the market’s rate of growth.”

“Our plant in Senegal will soon be producing cement and our South African venture, Sephaku Cement, is well on track to open in the early part of 2014. These two plants will be our first production ventures outside Nigeria as we aim to become Africa’s leading supplier of cement,” he added.

Adapted from press release by


 

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