The pan-African performance of Dangote Cement, the flagship subsidiary of Dangote Industries Limited, helped cushion the impact of the headwinds that slashed company profits in Nigeria last year, pushing up profit after tax by 19.2% to N455.6bn ($283.4m), allowing the group to increase its share dividend by 50% to N30 per share.
While Nigeria accounts for around 68% of Dangote’s total cement production capacity of 52 million tonnes per annum (mta), sales volumes in the country fell by 8.1% to 16.4mta last year, although revenue rose 7.7% to N1.29trn ($802.5m).
The company attributed the decline in Nigeria to low levels of liquidity, election-related uncertainties, sharp currency devaluation and heightened transport costs resulting from petrol subsidy removal.
But pan-African sales volumes of cement ex-Nigeria increased by 12.7% to 11.3mta, accounting for 41.2% of the company’s total sales. Revenue from the region more than doubled to N925.9bn ($576m) compared to 2022.
The operations outside of Nigeria are in Cameroon, Congo, Ghana, Ethiopia, Senegal, Sierra Leonne, South Africa, Tanzania and Zambia, with the highest contribution of mta coming from South Africa and Tanzania with 2.8mta and 3mta respectively.
Last year, the company began operations at its 0.45mta grinding plant in Ghana, commissioned a compressed natural gas (CNG) station in Tanzania, and exported clinker from Nigeria and Congo to its grinding plants in West Africa.
“I think the medium and long-term outlook for the company is still broadly positive,” says Gbolahan Ologunro, portfolio manager at FBNQuest, an investment banking and asset management firm in Lagos.
“In 2024, we should see some respite in the Nigeria operations, especially in terms of subdued currency challenges as ongoing efforts by the central bank to boost liquidity within the forex market should help to ease downward pressure on margins within the Nigerian market,” he said.
The Dangote Group, founded and chaired by Aliko Dangote, has three subsidiaries listed on the Nigerian Exchange Limited.
Forex exposure
Analysts at Lagos-based CardinalStone Partners, in their highlights from Dangote Cement’s conference call on 4 March, said the repatriation from investments in pan-African businesses in 2023 brought in inflows of over $200m, and that while currency volatility remains a headwind, management had reiterated its commitment to source raw materials locally and reduce forex exposure.
“Dangote Cement’s aim to improve its export earnings to match its forex needs should bode well for the company’s bottom line in FY’24,” they added.
Last year, all the currencies in the company’s countries of operation, except the CFA franc, depreciated. Nigeria’s currency was one of the worst hit when in June 2023, newly elected President Tinubu introduced a raft of monetary reforms resulting in significant forex losses, the naira plummeted around 40%.
As a result, Dangote Cement said its net forex loss widened to N164.1bn ($102m) last year from N53.93bn ($33.5m) in 2022.
Dangote Sugar Refinery Plc posted a forex loss of N172.19bn ($107.1m) last year, up from N1.89bn ($1,175) in 2022. Within the same period, it swung to a loss after tax of N73.76bn ($45.8m) from a profit of N54.74bn.
The subsidiary involved in the production of refined salt, NASCON Allied Industries Plc, saw its profit more than double to N13.73bn. It recorded a net forex gain of N228.37m, compared with a loss of N368.69m in 2022.
Effective strategy
CardinalStone Partners said Dangote Cement’s balance sheet “remains resilient with a gross cash balance of N447bn and net assets of N1.7trn as of the end of the financial year 2023”.
“In FY’24, we expect double-digit volume growth for Nigerian operations, following the low base of FY’23 and on the back of a strong recovery in Nigeria as the broader macroeconomic environment stabilises from the impact of policy reforms,” it said.
Arvind Pathak, chief executive officer of Dangote Cement, said 2023 was “yet another testament to the effectiveness of our diversification strategy” despite the challenging macroeconomic conditions.
He said the company continued to build on its cost reduction strategy amid the high operating cost environment, adding that the cost containment measures involved the use of alternative fuel to improve its energy mix, efficiencies in plant operations, and the phased transition from diesel-powered trucks to CNG ones.
Total revenue for the Dangote Group increased by 36.4% to N2.21trn in 2023, reflecting an increase in prices in line with inflationary realities compared to the same period last year, according to the company’s latest annual results. (The Africa Report)
