Half-year 2022: Dangote and BUA Cement spend N174 billion on fuel and electricity amid rising inflation
Dangote Cement Plc and BUA Cement Plc spent a whopping N173.537 billion on fuel and electricity during the six months ended June 30, 2022, an increase of 38.34% from the recorded N125.44 billion during the comparable period of 2021.
This represents 41.33% of the total cost of sales of N419.965 billion recorded by cement companies during the period under review.
This was in the unaudited half year results of the two companies tracked by Nairametrics. Some of these cost pressures were due to the depreciation of the naira while others were due to macroeconomic inflationary pressures, particularly in the domestic market where average inflation intensified.
After years of privatization of the power sector, manufacturers have yet to see any noticeable improvement in power supply, forcing them to rely heavily on internal power supply at enormous cost. Yet electricity is the only critical infrastructure to boost manufacturing and create jobs.
The inflation rate increased to 18.60% at the end of June 2022, the highest in 11 months due to rising food costs, supply chain disruptions, naira depreciation, insecurity and deterioration of infrastructure.
The news continues after this announcement
With the headline inflation rate for July 2022 published yesterday by the National Bureau of Statistics (BNS) which stood at 19.64% or 2.27% more than the rate recorded in July 2021 which was (17. 38%), there are concerns that the surge may lead to increased pressure on manufacturers’ costs, especially for gas and other raw materials.
According to data tracked by Nairametrics, the after-tax profit of these companies stood at N233.668 billion from N235.026 billion in 2021, representing a marginal decline of 0.7%. This was due to the rising cost of sales which swallowed up a large part of the profits following the rise in inflation and the high exchange rate.
The news continues after this announcement
Business cost of sales stood at 419.965 billion naira for the half of 2022 compared to 342.275 billion naira in 2021, representing a growth of 22.7%.
- A quick look at the financials showed that Dangote Cement consumed fuel and electricity worth N129 billion in H1 2022 compared to N98.978 billion in 2021, representing a growth of 31.3% . Following the high cost of sales, profit after tax decreased by 10.19% to 172.104 billion naira for the half of 2022 from 191.630 billion naira in 2021. Cost of sales increased by 16.78% to 322.461 billion naira. naira against 276.115 billion naira.
- BUA Cement spent N43.580 billion on energy in the first half of 2022, an increase of 64.66% from the N26.446 billion reported in the first half of 2021. Profit after tax was N61.364 billion in 2022 from N43.396 billion naira in 2021, accounting for an increase of 41.4% while the cost of sales stood at 97.504 billion naira in the half year of 2022 compared to 66.158 billion naira in 2021, representing a growth of 47.38 %.
What they say
- Chairman and CEO, Dangote Cement, Michel Puchercosspeaking on the result said: “Despite high inflation due to a highly volatile global environment, the first half of 2022 was positive. We delivered increases in revenue and EBITDA which generated strong cash generation across the We recorded revenue of N808.0 billion, up 17% from last year and Group EBITDA of N373.2 billion, up 6.3% with an EBITDA margin of 46.2%.
- Puchercos explained that the significant increase in energy and AGO costs are having a negative impact on the production and supply of cement products. He added, “to boost consumer engagement and support demand ahead of the rainy season; we have started the 3rd season of our national consumer promotion – “Bag of Goodies 3”. Operationally, we are ramping up production at our Okpella plant and making good progress to deploy crushing plants in Ghana and Ivory Coast.
- He said that the unstable international context reinforces the efforts to increase the use of alternative fuels and the execution of the export-to-import strategy. According to him, the company is reducing its dependence on imported inputs and making local markets self-sufficient.
- “Our continued focus on efficiency, meeting market demand and maintaining our cost leadership strengthens our ability to consistently deliver superior profitability and value to all shareholders,” he added
- BUA Cement Plc said it is considering raising capital for capacity expansion at BUA Cement’s integrated cement plant in Kalambaina, Sokoto State, Nigeria, which would include increasing its capacity by 2.0 million tonnes per annum (MTPA) to 8.0 MTPA.
- According to a statement obtained from Nigerian Exchange Limited (NGX), the company said “In pursuance of our disclosure obligations under Chapter 17 of the Regulations, BUA Cement Plc hereby gives notice to Nigerian Exchange Limited (NGX), its esteemed shareholders and the investing public that the company has entered into discussions with the International Finance Corporation (IFC ), acting as lead arranger in conjunction with a number of other lenders in a syndication pool, to secure a loan for the expansion of BUA Cement’s integrated cement plant in Kalambaina, Sokoto State, in Nigeria”.