Business
Thriving in crisis: Nigerians decry DanCem, BUACem, others for abnormal profits
• Cement producers are price gouging – Expert
They must reduce price – Minister
Questions have continued to trail the excessive year-on-year profits declared by cement companies operating in the country amidst biting macroeconomic challenges, Business Hallmark can report.
Nigerians, who spoke on the exceptional feats, wondered how the cement industry, a sub-sector of the manufacturing industry, continues to declare huge profits and dividends year after year, while their counterparts in the real sector continue to grapple with macroeconomic pressures, including escalating cost of raw materials, elevated electricity tariff, transportation and finance costs, rising inventories and huge losses.
Nigeria had been battling a debilitating economic downturn, which has taken a toll on her economy. On its heels followed low industrial capacity utilisation, decline in economic activities, credit crunch, high interest rates, high operating cost, deteriorating infrastructure, weak naira and job losses.
While some of these developments could be blamed on the global economic crisis, it was exacerbated by sheer maladministration and direct effects of the policies of governments, especially the last two administrations.
A recent report on Nigeria’s Gross Domestic Products (GDP) by the National Bureau of Statistics (NBS) shows that growth in the manufacturing sector slowed to 1.38% in full year (FY) 2024 owing to worsening macroeconomic challenges amid shrinking consumer spending.
According to data from the fourth quarter GDP report, growth in the manufacturing sector declined from 1.40% in 2023 to 1.38% in 2024.
Also, the sector’s contribution to Nigeria’s GDP in Q4 ’24 declined to 8.21 percent from 8.64 percent recorded in 2023.
Meanwhile, real GDP growth in the manufacturing sector in the fourth quarter grew marginally by 1.79% on a year-on-year basis, compared to 0.41% in Full Year 2023 and 0.86% in Q3 ‘2024.
While real GDP recorded a marginal growth in the last quarter of 2024, manufacturers claimed it was a very weak growth, blaming it on worsening challenges that impacted their operations in the year.
Hostile environment
Speaking on the report, President of the Manufacturing Association of Nigeria (MAN), Francis Meshioye, lamented that the manufacturing sector experienced a myriad of macroeconomic and infrastructural challenges in 2024, which severely impacted its performance.
While stating that the sector faced mounting pressure from foreign exchange volatility, high interest rates, galloping inflation, high energy bills, record low sales, multiple levies and taxation, as well as security challenges in 2024, the MAN president said these challenges strained the sector’s profitability and curtailed its contribution to the nation’s GDP.
As a result, many local manufacturing concerns have either scaled down their operations or totally shutdown, while some foreign firms like Procter & Gamble and GlaxoSmithKline etc have exited the nation in the last three years.
However, while other sub-sectors of the manufacturing industry continue to struggle, the cement industry is seemingly unaffected. Year after year, cement makers, Dangote, BUA and Lafarge, Ibeto etc have declared huge profits and awarded huge dividend payouts to their shareholders. This comes from exorbitant prices of the products, which, though barely affected by the economic headwinds, have rise threefold.
According to the 2024 unaudited financial reports of Nigeria’s three biggest cement makers, Dangote, Lafarge and BUA analysed by BH, the firms’ profits after tax combined rose to N677.48 billion in 2024, representing a 17.6% increase from the N675 billion recorded in 2023.
Individually, Dangote recorded the highest profit, posting N503.4 billion Profit After Tax (PAT), followed by Lafarge which announced N100.1 PAT and BUA, which posted PAT of N73 billion.
DANGOTE CEMENT
Further analysis of each firm’s individual statements revealed that Dangote Cement’s performance was largely aided by a record sales N5.5 trillion in 2024 (68% growth), compared to N3.06 trillion in 2023.
Likewise, Dangote Cement saw its revenue climbed from N2.2 trillion in 2023 to N3.58 trillion in 2024, a 62.7% increase. This may be explained by government adoption of concrete roads, which depend on cement instead of bitumen.
A 5-year review of Dangote Cement financial statements indicates that the cement maker recorded a revenue of N1.03 trillion for the year ended December 31, 2020.
While Dangote Cement Nigeria accounted for N720billion of the revenue, the remaining came from its African operations.
Profit after tax amounted to N352.6 billion, with a paid out dividend of N20.00 per share.
In the year ended December 31, 2021, the cement maker recorded a revenue of N1.38 trillion. The revenue is made up of N993.34 billion from its Nigerian operations, while revenue from across African plants amounted to N397.32 billion.
While gross profit at the end of 2021 operating year stood at N538.37 billion, profit after tax amounted to N364.44 billion, with a paid out dividend of N20.00 per share.
In FY 2022, earnings before interest, taxes, depreciation and amortization (EBITDA) was N1.62trillion, profit after tax of N382 billion and dividends payout of N20.
In the same vein, Dangote Cement earned N1.3 trillion from its Nigerian operations in 2023, profit before tax of N553,104 billion, profit after tax of N455.583 billion and paid out dividend of N30.
BUA Cement
Like Dangote Cement, the Port Harcourt based BUA Cement also recorded an impressive performance in 2024.
For instance, the company’s revenues jumped by 90.8% to N876 billion in 2024, compared with the N459 billion it earned in 2023, while profit-after-tax increased to N73.9 billion, a 6.4% increase from N69.4 billion in 2023.
A summary of BUA’s financial statements (2020 – 2024) shows that the cement firm’s revenue hit N876 billion revenue in 2024, with profit-after-tax standing at N73.9 billion. The company also proposed N2.05 dividend per ordinary share for the period ended 2024.
In 2023, the firm raked in a revenue of N459 billion, with a profit-after-tax of N69.4 billion. Meanwhile, a total dividend of N2.80kobo per share was paid to shareholders in the financial year ended.
BUA Cement Plc also announced a significant revenue increase in the 2022 financial year, despite economic challenges that triggered an increase in operating cost. While total revenue earned stood at N361.9 billion, earning before tax was N154.5 billion, profit after tax N101 billion and a dividend payout of N2.66 kobo.
In 2021, earning revenue was N257.3 billion, while profit after tax was N90.1 billion. Dividend payout per share stood at N2.60 per share.
Lastly in 2020, BUA earned N209.4 billion as total revenue, profit after tax of N72.3 billion and dividend payout of N2.5 per share.
Lafarge
Lafarge Africa is not also left out in the profits maximization binge. According to its financial statement, the cement firm earned a revenue of N696.7 billion in 2024, from N405.5 billion in 2023 (an increase of 71.8%) and profit after tax of N100.1 billion.
A summary of Lafarge’s financial statements from 2020 to 2024 indicated that the cement maker earned a total revenue of N696.7 billion in 2024, declared a profit after tax of N100.1 billion and proposed to pay N1.20 kobo final dividend.
In 2023, the firm earned a total revenue of N405.5 billion, profit after tax of N80.7 billion and shared N1.90 as dividend in the financial year.
Likewise in 2022, Lafarge announced a gross revenue of N373.24billion, profit before tax of N68.31bill8on, profit after tax of N53.6 billion and dividend payout of N2 per share.
In the year ended 2021, Lafarge Africa announced a gross revenue of N293 billion, Profit Before Tax (PBT) of N69.7 billion and Profit After Tax (PAT) of N53.6billion. It also paid out N2 dividend per share to its shareholders.
In the same vein, Lafarge earned N231billion revenue in 2020, profit before tax of N37.2billion, profit after tax of N30.8billion PAT and dividend payout of N1 per share.
Positive factors
One major factor that contributed to the huge profits the three major cement producers had declared in the last five years, BH’s analysis of their reports revealed, is the inelastic demand of their products, and their ability to constantly effect an upward review of the prices of their products, which they blamed on rising operational costs.
Despite accusations of exploitation against them by users and stakeholders, BH checks revealed that the three cement manufacturers effected four upward price reviews in 2024 alone.
In January 2024, a 50kg bag of cement sold for N4,200 on average. Since the fourth increment in November 2024, cement prices have climbed to between N8,000 and N9,000 (almost 100% hike), depending on the brand and location.
Unlike their counterparts in the cement sector, who are successfully getting away with frequent price adjustments, other manufacturers and producers of goods in the real sector of the economy have not been that lucky, as they are stuck between increasing prices to recover rising costs or maintaining prices to retain market share.
For Dangote in particular, its Africa operations aided its growth with the inflow of dollars, which benefited from the massive devaluation of the naira, and boosted its revenue.
As a way out of the logjam, manufacturers had resorted to reducing the sizes of their products, instead of the difficult option of increasing prices and risk losing their customers.
In late 2024, the Joint Committee of the House of Representatives investigated the sharp rise in cement prices in the country.
The lower chamber of the National Assembly ordered cement manufacturers to submit detailed documents of their production costs from January 2020 to July 2024 to justify the market price of cement.
Defending the high cost of his company’s product before the House Joint Committees, Dangote Cement’s Managing Director, Arvind Pathack, said 95% of production costs are imports or foreign exchange related.
He also blamed the surge in price to foreign exchange limitations, sharp increases in input costs and logistical challenges exacerbated by the poor state of infrastructure in the country.
The House Joint Committee also visited the production plants of cement firms after reviewing their financial records to establish the cost of production and determine a fair price for the product.
However, several months after the hearing, the Joint House Committee is yet to come out with its findings.
Outcry over price
A member of the House committee who spoke to BH on the condition of anonymity alleged that the firms had continued to make significant profits despite sourcing most of their raw materials locally, questioning why the price of cement keeps rising while producers continue to profit.
Speaking during a recent inspection tour of federal road projects, the Minister of Works, David Umahi, lamented the high price of cement.
While appealing to cement manufacturers to reduce the price from N9,500 to N7,000, the minister said the product’s high cost has negatively impacted ongoing infrastructure projects across the country.
Umahi argued that with the recent stabilisation of the foreign exchange rate, cement producers’ excuse of FX volatility can no longer be sustained.
“Let me use the opportunity to express dissatisfaction with the cost of cement. The cost of petrol is coming down, and efforts are being made by Mr. President to fix the road. I am happy that the policies of Mr. President are working. Today, price of dollars has drastically reduced”.
Speaking on the development, the President of the National Association of Block Moulders of Nigeria (NABMON), Prince Adesegun Banjoko, said the government should do what is necessary and save the nation from exploitation.
Banjoko called for the establishment of the Commodity Price Regulation Board, imploring the government to ensure that the board commences work immediately.
He also urged the government to open the nation’s border for cement importation to make the market more competitive and make the price reasonable.
“Our government should brace up against the enemies of this nation making life unbearable for the common man, the NABMON predicted admonished.
A brand and products specialist, Pascal Ideye, said all cement makers in the country are guilty of what he called ‘price gouging’.
“They have formed a cartel to influence the price of cement. In fact, what they are doing is what is called ‘price gouging’, a practice of increasing the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair, especially when demand is high and supplies are limited”, Ideye stated.
