Dangote Cement declares huge profit in first quarter of 2013

The firm plans to improve production in its three plants in Nigeria.

Dangote Cement, Nigeria’s leading cement producer with three plants in the country, has announced plans to expand in 13 other African countries. The firm also announced its unaudited results for the three months ended March 31.

The Group, with integrated quarry-to-depot producer with production capacity of 19.25 million metric tonnes per annum (mmtpa) in Nigeria at the end of 2012, plans to increase to at least 29mmtpa in 2015 and to build a further 19mmtpa of production, grinding and import capacity across Africa, which is expected to be operational by the end of 2015.

A 3mmtpa capacity is currently being built in the firm’s Obajana plant in Kogi State, Nigeria, arguably the largest in Sub-Saharan Africa with 10.25mmtpa capacity across three lines.

The new 6mmtpa Ibese plant in Ogun State, near the key market of Lagos, was inaugurated in February 2012, according to the communique. Building is also underway to add 6mmtpa of capacity, the firm said in a release.

The Gboko plant in Benue State has 3mmtpa capacity with an upgrade to 4mmtpa planned in 2013.

The firm also announced an investment of more than $2.5bn to build manufacturing plants and import terminals across Africa. It added that current plans are for integrated or grinding plants in Cameroon, Ethiopia, Gabon, Republic of Congo, Senegal, South Africa, Tanzania and Zambia, as well as import/packing facilities in Ivory Coast, Ghana, Guinea, Liberia, and Sierra Leone.

Through its recent investments, Dangote Cement said it has eliminated Nigeria’s dependence on imported cement and is transforming the nation into an exporter serving neighbouring countries.

The firm’s financial highlights in its unaudited results include a consolidated group revenue up 39.5 per cent to N95.4 billion, Gross profits up 64.7 per cent to N66.0 billion, among others.

Operating highlights include robust growth in market demand – up nearly 16 per cent across Nigeria; Nigerian sales volumes up 38.4 per cent to 3.33 million tonnes. The firm said gas supply improved, helping margins as well as strong focus on direct-to-customer deliveries, and easier payments.

Devakumar Edwin, Chief Executive of Dangote Cement, said the firm’s business in the first quarter has started on a good note.

“The year has begun well for Dangote Cement and our 38 per cent increase in volumes far outpaced the Nigerian market’s strong growth of 16 per cent. Our gas supply has been better this year and that has driven margins upwards from the first quarter of 2012, when our new capacity at Ibese and Obajana was just coming on-stream,” he said.

“We are increasing our focus on delivering directly to our customers and have made it easier for them to order and pay for our cement. This has allowed us to improve our position in the market and we remain confident of a good year,” he added.

Last month, the company announced its audited results for the financial year ended December 31, 2012.

Financial highlights included consolidation of African entities (including Sephaku Cement and Green View International Ltd, Ghana) with effect from January 1 2012; consolidated Group revenue up 23.6 per cent to N298.5 billion; Nigerian revenue up 18.3 per cent to N285.6 billion.

The firm, while highlighting its operational landmarks said new capacity delivered 19.9 per cent increase in sales to 10.4 million tonnes and that nearly 100 per cent of sales were locally produced cement as the group ends importation.

Mr. Edwin lamented severe flooding that affected demand and a shortage of gas that affected its margins.

“In the first half of the year (2012) we launched 11 million tonnes of new capacity that brought Nigeria to self-sufficiency in cement production. Because of our investments there is no more need for Nigerians to buy foreign cement,” he said.

“By the end of 2012 we were preparing to make Nigeria an exporter of cement to neighbouring countries and in the first quarter of 2013 we realised that goal, to the benefit of the Nigerian economy. Soon, we hope to be manufacturing cement in Senegal as we expand into other African countries to supply a basic but profitable commodity that is vital to Africa’s growth.”

“Current trading is strong. We estimate that demand for cement in Nigeria increased by almost 16 per cent in the first quarter of 2013,” he said; adding that the firm’s volumes rose by substantially more than the market’s growth rate in the same period, boosting the firm’s optimism for a very positive business year.

Nigeria’s cement industry, regulated by the government in order to protect the interest of the populace and promote the industry, has been pushing to find its feet and contribute a tangible quota to the nation’s Gross Domestic Product (GDP).

Presently, there are four main producers of cement in Nigeria- Dangote Cement, Lafarge WAPCO, UNICEM, and Ashaka Cement, with Dangote possessing a larger share of the market, about 70 per cent, according to reports form finance firms.

It is believed that as the companies seek to expand their production capacities along with the industry’s call for favourable policies, the nation’s cement industry would find its footing to meet local demands and compete internationally.