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Michel Puchercos: Dangote Cement changes the game

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Michel Puchercos, Dangote Cement new MD

By EMEKA EJERE

The management of Dangote Cement Plc recently announced the appointment of Mr. Michel Puchercos, as the new managing director and chief executive officer (MD/CEO) of the company with effect from February 1, 2020 to replace the retiring Engr. Joseph Makoju. This came few days after the management of rival Lafarge Africa Plc disclosed that the French-born expatriate was resigning from the company effective January 17, 2020.

A statement made available to the Nigerian Stock Exchange (NSE), the investing public and other stakeholders by the general counsel and company secretary of Lafarge, Adewunmi Alode, reads:

“The Board of Lafarge Africa Plc hereby notifies The Nigerian Stock Exchange and the investing public of the resignation of Mr. Michel Puchercos from the company as the Group Managing Director/Chief Executive Officer with effect from the 17th of January 2020.

“Mr. Puchercos served the company as an Executive Director on the Board since the 1st of April 2016. During his tenure as the GMD/CEO, he implemented a successful turnaround plan for the business by addressing the legal, financial and management structure of the company, Health & Safety improvements and the implementation of new operating processes.

“We wish him the best in his future endeavors.”

Prior to his resignation, Mr. Puchercos was one of the highest earning CEOs in Nigeria with annual income of N312 million, as of the year 2018.

A few days after Lafarge made his resignation public, its rival, Dangote Cement announced that Mr. Puchercos would be resuming as its MD/CEO effective February 1, 2020, the same position he resigned from at Lafarge.

“This is to announce the retirement of Joseph Makoju from the board of directors, and as the group managing director/ CEO of the Dangote Cement Plc effective from 31 January 2020,” a statement signed by Edward Imoedemhe, the company’s deputy secretary read.

“The board has approved the appointment of Michel Puchercos as his replacement on the board of directors, as the Group CEO, effective from 1st February 2020.”

Explaining his background, Imoedemhe said: “Puchercos has more than 20 years’ experience in the cement industry, having served in various capacities at Lafarge including as the president & chief executive officer of Lafarge Halla Cement, director of strategy and systems at Lafarge Gypsum through chief executive officer of Bamburi Cement, Kenya, Hima Cement, Uganda and chairman, Mbeya Cement, Tanzania.

“His last appointment was as the Group managing director and country CEO of Lafarge Africa Plc, a company listed on premium Nigeria stock exchange (Lagos).”

According to the disclosure notice by Dangote Group, Mr. Puchercos appointment will be part of its agenda in its next annual general meeting for ratification by shareholders in line with a standing procedure of Companies and Allied Matters Act.

Lafarge Africa Plc is a cement manufacturer with headquarters in Lagos, Nigeria. It is controlled majorly by Lafarge Holcim, that used to trade on the Nigerian Stock Exchange as Lafarge Wapco Plc before the merger of Lafarge and Holcim consolidated the company’s assets in Nigeria and South Africa. The consolidation resulted in changing the company’s name to Lafarge Africa.

It has since become one of Nigeria’s leading cement manufacturers, and distributes its products through its sub divisions that include Wapco, Lafarge South Africa, Ashaka Cement, United Cement Company and Atlas Cement.

On the other hand, Dangote Cement Plc is a Nigerian multinational publicly traded cement manufacturer with headquarters in Lagos, Nigeria. The company is a subsidiary of Sephaku Cement and its parent company is Dangote Group. Dangote Cement is known for cement production and distribution in Nigeria and nine other African countries, including Senegal and Tanzania.

The two cement companies have created impressive profiles competing to lead the way in Africa. With his 20 years’ experience, Mr. Puchercos guided Lafarge through thick and thin and led the company out of its major hurdles. As a sign of impressive recovery, Lafarge Africa in October 2019 announced over 173 per cent profit in its nine months of operations.

In its quarterly performance report to the Nigerian Stock Exchange, the company said its operating profit rose from N2.79 billion in the third quarter of 2018 to over N7.64 billion in the corresponding period of 2019. The company, which significantly de-leveraged with net financial debt reduction of about 79.2 per cent, has a current installed cement production capacity of 10.5 metric tons per annum.

The report said the company recorded a strong third quarter earnings before interest, tax, depreciation and amortization increase by 32.7 per cent N8.6 billion to N11.4 billion, third quarter finance costs declined by over 70.6 per cent.

The company also recorded a positive net income for four consecutive quarters, with a successful divestment from Lafarge South Africa Holdings.

Puchercos had stated: “Our Strategy 2022 -building for growth – in Nigeria is delivering the expected results with strong EBITDA and operating profit improvement, robust net income and operating cash flow development.

“Our turnaround and cost reduction strategy in the third quarter continue to deliver strong margins with improvement in commercial transformation, logistics performance, industrial and energy efficiencies. Our ambition is to continue the acceleration of growth and earnings in the fourth quarter.”

So the sudden switch by Mr. Puchercos is suggesting that Dangote Cement may be facing some tough times and needs the messiah in the CEO of Lafarge. It also suggests that Dangote Cement may have made the move as a strategy to further widen its lead over a major rival.

Rivalry in the cement business has progressed with Dangote Cement being the largest manufacturer in the country with about 60% of market share, followed by Lafarge Africa with 30% share of customer wallets and CCNN picking up the balance of 10% of consumer spending on the building item.

According to the 2018 Global Cement Directory, Dangote Cement is the 10th largest cement producer in the world. With a total capacity of 43.8 metric tonnes per year and 12 plants (10 integrated and two grinding plants); it is Africa’s largest home-grown cement producer.

With a market capitalisation of N3.22 trillion as at 10th June 2019, it is the most capitalised company on the Nigerian Stock Exchange (NSE) as it contributes 24.12% to the total market CAP.

The earning profile of cement giant over the last few quarters from Q1 2018 to Q1 2019 reveals that except Q1 2019, revenue grew by at least 12%. However, revenue declined by 0.80% in Q1 2019, as the company recorded N240.16 billion revenue.

Notwithstanding, this performance has been very commendable as revenue increased impressively in each of the quarters of 2018. Going further, the PAT also followed an upward trend as PAT rose during 2018 but saw a reversal of 16.5% in Q1 2019.

With his wealth of experience and record of success in the cement business across Africa, Mr. Puchercos becomes the man who wears the cap to end the reversal of its fortunes. It is clear that the turnaround he produced at Lafarge is the least Dangote Cement will take from him.