During the nine months ending September 30, 2022, Dangote Cement Plc and BUA Cement Plc spent a whopping N263.157 billion on fuel and power. This is a 44.31% increase over the N182.355 billion recorded during the same period in 2021.
This figure also accounts for 42% of the cement companies’ total cost of sales of N626.660 billion during the period under consideration. Some of these cost pressures were caused by the naira’s depreciation and macroeconomic inflationary pressures, particularly in the domestic market, where average inflation was elevated.
Despite the high cost of sales, which ate up a large portion of the companies earnings and stood at N626.660 billion, they both managed to generate a combined profit after tax of N287.115 billion, according to Naijaonpoint data.
Years after privatizing Nigeria’s power sector, Nigerian manufacturers have yet to see significant improvements in electricity supply. As a result, they are forced to generate their own electricity, albeit at exorbitant costs. Power is the most important infrastructure required to boost the manufacturing sector and create jobs.
Breakdown of the analysis
- A cursory look at the financials shows that Dangote Cement consumed fuel, and power valued at N198 billion during the nine months, as against N141.750 billion in 2021, representing a growth of 39.79%. Profit after tax declined by 23.41% to N213.101 billion for the period as against N278.250 billion in 2021. The cost of sales grew by 19.94% to N483.831 billion from N403.388 billion.
- BUA Cement spent N65.005 billion on energy in the nine months under review, representing an increase of 60.09% over N40.605 billion reported during the period ended September 2021. Profit after tax was N74.014 billion in 2022 as against N65.906 billion in 2021, accounting for an increase of 12.30%, while the cost of sales stood at N142.829 billion during the period under review from N99.654 billion in 2021, representing a growth of 43.32%.
Comments of Dangote Cement CEO
Chief Executive Officer of Dangote Cement, Michel Puchercos, while speaking on the third quarter results, explained that “to mitigate the impact of the significant increase in energy and AGO costs, we are strengthening our efforts to ramp up the usage of alternative fuels.
“So far this year, we have co-processed 101,553 tonnes of waste, representing a 77% increase in 2021. We are on track to commission our alternative fuel feed system at Obajana lines I and V, and Ibese line II in November.
“Additionally, we are ramping up our investment in compressed natural gas, CNG, to reduce our AGO usage.”
He explained that the company recorded an increase in revenue of N1,177.3 billion, up 15.2% compared to last year.
Comments of BUA CEO
- During a conference call, the chief executive officer of BUA Cement, Mr Yusuf Binji said that the cement maker has resorted to using locally sourced coal and liquefied natural gas in favour of imported coal to withstand the stress in the foreign exchange market.
Comments of BUA corporate affairs manager
The corporate affairs manager of BUA Cement, Mr O’tega Ogra, in a report cited by Naijaonpoint, said “BUA Cement’s switch to LNG at our Sokoto plant was a strategic decision done for efficiency gains and to reduce our foreign exposure on coal imports since LNG can be sourced locally.
We started the conversion of the plant last year and it is now completed. BUA Cement’s Sokoto plant now runs on locally sourced coal and LNG rather than the previous mix of local and foreign-sourced coal and LPFO. LNG will also be used to power engines used in generating electricity and will replace LPFO and AGO.
Additionally, the use of LNG will reduce our carbon footprint and conserve the environment in line with our commitment to environmental sustainability and the Paris Accord of which Nigeria is a signatory, he said.
