Article Summary
- Dangote Cement reported a decline in revenue to N280.3bn in Q1 2023 compared to N321.9bn in Q1 2022 due to macroeconomic headwinds and bad government policies affecting the Nigerian market.
- The Nigerian market contributes around 58% of group volumes shipped, and Dangote Cement cited a cash crunch, negative election sentiments, and the central bank’s policies for the decline in volume and revenue.
- Despite this, Dangote Cement posted a profit after tax of N109.5bn, aided by lower tax charges, and is increasing its local production capacity in Nigeria to meet the rising demand for cement.
Dangote Cement, Africa’s largest cement manufacturing company has reported its 2023 first quarter results showing a dip in volumes amidst macroeconomic headwinds in the country.
The company reported revenues fell to N280.3 billion in the first three months of 2023 compared to N321.9 billion same period but in 2022. This is the first time in 5 years that the cement giant has posted a lower revenue on a quarter-on-quarter basis epitomizing the effect bad government policies can have on businesses.
Dangote Cement has always delivered revenue growth quarter on quarter, year on year on the back of construction and infrastructure development spending (See chart).
Before now Dangote Cement has recorded 5 consecutive revenue growth in the first quarter of every year since 2019.
However, homegrown challenges such as cash crunch, and election uncertainty slowed down infrastructure spend. In late December Nigeria’s central bank exectuted policies aimed at introducing new naira notes and limiting cash withdrawal limits. The result was a catastrophic jolt to the financial system affecting busineses that rely heavily on cash to distribute products. Dangote Cement was one of such.
- “In Nigeria, the cash crunch coupled with the uncertainty around the general elections led to a slowdown in key private and public infrastructure investments. Consequently, our Nigerian operations recorded a drop in volume, resulting in a 13.5% decline in Group Volume.
- “The uncertainty and sentiments around the Nigerian elections, stalled economic activities with many private and public projects on hold, until the outcome of the elections. Collectively, this negatively impacted volume of cement sales and limited our ability to maximize production during the period.”
Dangote Cement Nigerian operations sold 3.6Mt of cement in the first quarter of 2023, down 24.6% from the 4.8Mt sold in Q1 2023. The Nigerian market makes up about 58% of group volumes shipped compared to 66.7% same period in 2022. The Nigerian operations also represented 69% of group revenues compared to 78% same period last year.
The company also explained the decline in volume was due to a cash crunch and negative sentiments around the elections. The cash unavailability impacted construction workers’ daily wages and retailers’ ability to pay for cement in cash.
