"Dangote Cement records first revenue drop in 5 years, blames cash crunch, elections"

" Dangote Cement records first revenue drop in 5 years, blames cash crunch, elections \r\n\r\n \r\n \r\n\r\nDangote Cement, Africa\u2019s largest cement manufacturing company has reported its 2023 first quarter results showing a dip in volumes amidst macroeconomic headwinds in the country.\r\n\r\nThe company reported revenues fell to\u00a0 N280.3 billion in the first three months of 2023 compared to N321.9 billion same period but in 2022. \u00a0This 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.\r\n\r\nDangote Cement has always delivered revenue growth quarter on quarter, year on year on the back of construction and infrastructure development spending (See chart).\r\n\r\nBefore now Dangote Cement has recorded 5 consecutive revenue growth in the first quarter of every year since 2019.\r\n <img class=\"size-large wp-image-448391\" src=\"https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?w=1024\" sizes=\"(max-width: 1024px) 100vw, 1024px\" srcset=\"https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png 2397w, https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?resize=300,171 300w, https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?resize=768,437 768w, https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?resize=1024,583 1024w, https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?resize=1536,875 1536w, https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?resize=2048,1166 2048w, https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?resize=750,427 750w, https:\/\/nairametrics.com\/wp-content\/uploads\/2023\/05\/Dang-Cem-Revs.png?resize=1140,649 1140w\" alt=\"\" width=\"1024\" height=\"583\" data-pin-no-hover=\"true\" \/> Dang Cem Revs \r\nHowever, homegrown challenges such as cash crunch, and election uncertainty slowed down infrastructure spend. In late December Nigeria\u2019s 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.\r\n\r\n \u201cIn Nigeria, the cash crunch coupled with the uncertainty around the general elections led\u00a0 to a slowdown in key private and public infrastructure investments. Consequently, our\u00a0 Nigerian operations recorded a drop in volume, resulting in a 13.5% decline in Group\u00a0 Volume. \r\n\r\n \u00a0 \u201cThe 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.\u201d \r\n\r\nDangote Cement Nigerian operations\u00a0 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.\r\n\r\nThe 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\u2019 daily wages and retailers\u2019 ability to pay for cement in cash.\r\n Higher cost pressures \r\nThe total manufacturing cost for the group also rose to N163.6 billion compared to N154.1 billion same period in 2022, while the \u00a0Admin cost also rose 12.5% to N87.3 billion.\r\n\r\nThe company attributed the 6.2% rise in manufacturing cost to inflationary trends while the rise in admin cost was due to increases in haulage expenses and AGO cost. They also cited devaluation as another area of cost pressure.\r\n\r\nOverall the company\u2019s Ebitda fell from N211 billion to N185.7 billion dragging the Ebitda margin down to 45.7% from 51.1% same period in 2023.\r\n\r\nDespite the challenges arising from its Nigerian operations, Dangote Cement managed to post a profit after tax of N109.5 billion up from N105.98 billion a year earlier. The company\u2019s profit was aided by lower tax charges in 2023 compared to the same period in 2022.\r\n What they are saying \r\nThe CEO of Dangote Cement Arvind Pathak also commented on the results citing the challenges enumerated above.\r\n\r\n \u201cThe 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.\u201d \r\n\r\n \u201cIn fulfilling our commitment to create additional value for our shareholders, we have received regulatory approval for our second buyback programme. We will continue to monitor the evolving business environment and market conditions, in making decisions on tranches of the share buy-back programme.\u201d \r\n\r\n \u201cLooking ahead, our strategic growth priorities are on track. We are progressing well to deploy grinding plants in Ghana and Cote d\u2019Ivoire, and we have further announced plans to strengthen our local production capacity in Nigeria. Arvind Pathak\u201d \r\n\r\n Despite the challenges , Dangote Cement stated that it has continued to see opportunities based on rising demand for cement in the country. This has hastened its efforts at increasing its local capacity in Nigeria to 41.25Mta from 35.25Mta.\r\n\r\n \u201cOpportunities abound for cement demand in the Nigerian market, and to meet the increasing demand\u00a0 we are strengthening our local production capacity efforts with the announcement of the construction\u00a0 of an additional 6Mta cement plant in Itori, Ogun state. Once completed, our local capacity in Nigeria\u00a0 will increase to 41.25Mta.\u201d \r\n\r\nThe company share price closed flat at N270 per share during the week ended April 28, 2023.\r\n\r\n \r\n "

"Dangote Cement records first revenue drop in 5 years, blames cash crunch, elections"

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