Projects: Dangote, Lafarge, BUA to See Solid Growth in 2024 –Analysts

Nigeria’s cement companies are expected to see better growth performance in 2024 as government ramp up capital projects spending.  The first three months of the year results showed that performance shrank when compare with fourth quarter of 2024.

On year on year basis, the cement producers grew sales significantly due to base effect of first quarter of 2023 when activities level, performance was impacted by naira crunch.

Higher retail prices across cement brands dragged volume growth as households, developers grapple with negative impacts of inflation. In its update, CSL Stockbrokers Limited said cement sector growth rate continues to reflect failing macroeconomic realities.

The investment firm stated that year on year growth rate for the cement sector rose by 30.24%, from 1.58% in Q1-2023 to 2.05% in Q1-2024.  However, analysts noted that on a quarter on quarter basis, the sector’s growth rate declined by 37.03%, dropping from 3.26% in Q4 2023.

“The increase can be attributed to the favourable low base effect during the quarter. In Q1 2023, the country faced a cash shortage due to the naira redesign program, which severely disrupted commerce.

“This disruption, coupled with uncertainty surrounding the general elections, led to a pause in essential corporate and government infrastructure projects”, analysts stated.

Despite the year on year increase in growth rate, CSL Stockbrokers Limited noted that the cement growth rate still falls below Q1 2022 levels (9.57%), as the sector continues to be impacted by the country’s failing macroeconomic realities, notably the depreciation of the Naira.

This resulted in considerable foreign exchange losses for the industry’s key players—BUA Cement, Dangote Cement, and WAPCO (Lafarge)—amounting to approximately N95.62 billion, marking a significant 1133.13% year on year increase, according to the update.

Analysts stated that these FX losses had a notable impact on the financial performance of the companies, with two out of the three experiencing a decline in pre-tax profits.

In the period, Lafarge WAPCO saw a significant decrease of 61.3% to N8.71 billion, while BUA Cement recorded a 40% year on year drop to N21.29 billion.

In contrast, Dangote Cement managed to report a pre-tax profit of N166.40 billion, marking a 13.3% increase from the previous year.  CSL Stockbrokers attributed Dangote Cement’s robust performance to its triple-digit revenue growth during the period, which bolstered its bottom-line figures.

“We maintain our expectation that the cement sector will perform better in 2024 compared with 2023. Beyond a favourable base effect, we expect output from the cement sector to be driven by increased cement demand.

“Additionally, cement prices are expected to continue reflecting current macroeconomic conditions, further boosting the productivity of the sector.

“We also believe we will see an improvement in government spending on infrastructural projects in 2024. While historical patterns suggest a potential CAPEX implementation rate of between  20% and 50%, we are optimistic there will be an improvement this year”.

That said, analysts noted that challenges such as the high cost of raw materials, persistent inflationary pressures, and rising energy costs are downside risks to expectations. #Projects: Dangote, Lafarge, BUA to See Solid Growth in 2024 –Analysts

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