Three major cement-producing companies in Nigeria, including Dangote Cement, Lafarge Africa, and BUA Cement, struggled to generate a marginal 2.5% increase in profits, reaching N277.7 billion in the first half of 2023, compared to N270.88 billion in the same period of 2022. High costs of sales and foreign exchange losses, coupled with double-digit inflation rates, impacted their profitability.
Lafarge Africa reported a 5.16% decline in profit after tax, reaching N35.48 billion in H1 2023, while Dangote Cement saw nearly a 4% growth, generating N178.6 billion profit after tax. BUA Cement managed a 2.5% increase in profit after tax, reaching N63.62 billion in H1 2023.
The combined cost of sales for the three companies in H1 2023 was N592.32 billion, representing a 16% increase from H1 2022. Total operating expenses stood at N270.4 billion in H1 2023, a 17.2% increase from the previous year. These expenses led to a drop in profit before tax for Dangote Cement by 9.4% to N239.86 billion in H1 2023.
Experts cited the challenging business environment in Nigeria, including high inflation rates, as impacting the profitability of cement producers. Despite the challenges, the ongoing construction of infrastructure projects by the federal government and the demand for housing infrastructure from the private sector contributed to the cement producers’ growth in H1 2023.
Opinion: The Nigerian cement industry faced various challenges in the first half of 2023, impacting profit margins for major producers. The rising costs of sales and foreign exchange losses, coupled with the country’s high inflation rate, posed significant obstacles to sustainable growth. However, the sector’s performance was partly boosted by the government’s infrastructure projects and private sector demand for housing. Cement producers should focus on innovative strategies, cost management, and sustainability ambitions to navigate the challenging business environment and maximize growth opportunities in the coming months.