Dangote Cement, the largest producer of the building material, recorded earnings growth, as it ramps up capacity by more than a third to meet Nigeria’s burgeoning demand, but its Pan Africa operations have been recording recurring losses.
The most capitalised company in Africa’s most populous saw revenue rise 16.67 percent to N1.61 trillion as at December 2022, largely due to better price realisation to offset rising costs.
However, profit from operating activities increased by a mere 0.58 percent to N585.87 billion as at December 2022, as inflationary pressures balloon costs.
Profit after tax (PAT) was up 4.90 percent to N382.31 billion as at December 2022 from N364.44 billion the previous year.
Aside rising cost of production caused by inflationary pressures and volatility in currency, recurring losses from the cement makers Pan Africa countries and rising finance costs brought on by rising interest rate as the central bank is all out to stabilise the economy are responsible for the single digit growth in profit.
For instance, the Pan Africa unit that comprises countries such as Cameroon, Congo, Ethiopia, Ghana, Sierra, and Senegal posted a combined loss of N111.49 billion as at December 2022 from a loss of N30.58 billion the previous year.
The company said the Pan-Africa volumes were down owing to extended plant maintenance in Senegal and Congo and volatility in cement/clinker landing costs in Cameroon, Ghana and Sierra-Leone.
Of course, Sub-Saharan Africa is reeling from the huge supply shocks from the Russia-Ukraine crisis and inflation at levels not seen in decades.
Sub-Saharan Africa will accelerate to 3.60 percent in 2023, up from 3.3 percent in 2022, but still below the 2010-2019 average of 4.10 percent, according to Fitch Solutions, a global leader in credit rating and research.
“SSA is also experiencing rising food and energy prices as well as weakening currencies. According to the IMF, the Russia-Ukraine crisis and its attendant effect, remains the biggest risk to growth in 2022,” said Dangote Cement.
There has been an acceleration in finance costs, but the company has the financial strength to pay interest money borrowed from banks.
Borrowing costs have been rising since the first quarter of 2022 as the central bank embarked on an aggressive tightening stance to rein in inflation.
Finance costs spiked by 98.43 percent to N130.37 billion as at December 2022.
The company’s robust capital structure gives it the leeway to finance key projects needed to grow earnings.