Displaying items by tag: Dangote Cement

Nigeria: Dangote Cement has recorded total sales of US$2.4bn in 2024, an increase of 62% year-on-year. This was reportedly driven primarily by cement and clinker sales in Nigeria, which contributed 57% of total sales. Its pre-tax profit grew by 32% to US$489m. The company's pan-African operations also recorded strong growth with sales up by 57% to US$934m. However, total sales volume rose by only 1.6%, indicating that sales expansion was driven by higher pricing rather than volume growth.

The cost of sales rose by 64% to US$1.1bn, largely due to higher raw material and fuel expenses, which accounted for over 67% of total costs. Operating profit rose by 57% to US$767m.

Ethiopia: Dangote Cement will invest US$400m to restart the second production line at its Mugher cement plant, doubling the capacity to 5Mt/yr. The plant became operational in 2015, but has since faced challenges, including recurrent violence in the region, according to Bloomberg.

Aliko Dangote said that the expansion project is expected to be operational ‘within the next 30 months’.

PPC revealed plans this week to build a new cement plant in the Western Cape region of South Africa. It has entered into a “strategic cooperation agreement” with Sinoma Overseas Development Company to put together a 1.5Mt/yr integrated plant for around US$160m. It is hoped that construction will start in the second quarter of 2025 with commissioning scheduled by the end of 2026.

CEO Matías Cardarelli described more details about the project during a tie-in webcast on 16 January 2025. Specifically, the new unit will be built at the company’s integrated Riebeeck Plant site due to the quality of the local limestone and the greater reserves. In addition, all the key environmental approvals and mining rights have already been obtained. Both this plant, and the nearby De Hoek Plant, will continue to run throughout the construction and commissioning period. A decision will then be made about required staffing. PPC did not explicitly say whether the two old plants would be closed but the new plant will “replace and increase the existing capacity” at the other sites.

Points to note from the announcement start with the low cost for the clinker production line. PPC’s 1Mt/yr line at its Slurry plant cost around US$75m when it was commissioned in 2018. Sinoma also built that one. However, negative currency exchange effects make comparisons tricky. In 2015 PPC said that the cost of the Slurry line was around US$115/t. It pointed out that the price was low as it was a brownfield investment. This compares to US$107/t for the Western Cape project, another brownfield project. Other recent integrated plant projects in Sub-Saharan Africa to consider include Cemtech’s clinker plant in Sebit, Kenya (US$170/t) or West International Holding’s forthcoming plant in Buikwe District, Uganda (US$150/t). Plans for a new PPC plant in the Western Cape go back to at least 2017 when the then CEO Johan Claassen said it was preparing for a ‘mega plant.’ At the time it was hoping to replace its Riebeeck plant with a ‘semi-brownfield’ facility that would use around 25% of the current plant’s equipment. The scheme had actually been around longer but Claassen remarked that insufficient domestic demand had held it back.

The next detail to consider is that PPC is planning to build this new plant within 100km of the coast. This was addressed directly with PPC saying that the new plant would be “extremely competitive” against imports. They say it will be able to produce cement, at least, to a similar cost to imports from Vietnam. It was also remarked that only 10 - 15% of the 1Mt/yr of imports, mainly from Vietnam, go to the Western Cape with the rest heading to KwaZulu-Natal via the Port of Durban.

PPC’s plans in Riebeeck are part of its ‘Awaken the Giant’ development strategy. For its six month financial results statement to September 2024 it said that it had “early positive and encouraging signs in all lines of our business.” In South Africa its earnings were up despite lower sales volumes. Dangote Cement’s local subsidiary, Sephaku Holdings, reported a similar picture with a small bump in revenue and earnings back up after coal and fly ash supply constraints a year earlier. PPC isn’t the only cement company developing capacity. Huaxin Cement-owned Natal Portland Cement was reportedly investing US$65m in the autumn of 2024 towards expanding its Simuma Plant in KwaZulu-Natal.

The cement sector in South Africa had a couple of ownership changes in 2024. As mentioned above, China-based Huaxin Cement bought Natal Portland Cement from InterCement at the start of the year. Then, Afrimat received approval to buy Lafarge South Africa in April 2024. Both of these incomers have clear ambitions to expand in the industry. In this context PPC’s decision to finally revive its Western Cape plans, before whatever its new competitors devise, makes sense. Expect more talk of capacity upgrades in the future.

Nigeria: Tetracore Energy has entered into an agreement with Dangote Cement to supply up to 400,000m³/day of compressed natural gas (CNG) for its logistics operations. The energy provider will deploy its mobile refilling units and establish mother stations nationwide to provide a supply of CNG for Dangote’s logistics fleet.

Nigeria: Dangote Cement has recorded a 0.6% year-on-year rise in profit to US$163m for the first nine months of 2024. Revenue increased by 69% year-on-year to US$1.5bn, driven by price adjustments, up from US$885m in the same period in 2023. Gross profit also rose, up 36% year-on-year from US$568m to US$774m. The company has commissioned 11 out of 17 alternative fuel projects and recently integrated 1500 compressed natural gas trucks into its fleet in an attempt to reduce costs.

Nigeria: Dangote Cement has exported 14 shipments of clinker from Nigeria to Ghana and Cameroon as part of its strategy to boost foreign exchange inflows, reports Business Post Nigeria. The company reported that high demand for its products has ‘significantly’ increased its pan-African operations.

CEO Arvind Pathak said “This effort resulted in a 55% surge in our Nigerian exports, underscoring our commitment to fostering African self-sufficiency.”

Nigeria: Dangote Cement has reported its financial results for the first half of 2024. The company recorded a net profit of US$117m, marking a 6% year-on-year increase from US$110m in the first half of 2023. Revenue also saw an increase to US$1bn, up by 85% year-on-year from US$587m. During the period, the company’s production volume was 13.8Mt, representing a 4% increase from the 13.2Mt produced during the first half of 2023. The group also reported a year-on-year increase of 50% in earnings before interest, depreciation and amortisation (EBITDA) of US$411m.

Gabon: President Brice Oligui Nguema of Gabon invited Aliko Dangote, President and CEO of Dangote Industries, to invest in Gabon's cement sector during a visit to the country. Discussions centred on potential cement plant investments to bolster Gabon's infrastructure development. President Nguema noted that the collabora­tion with Dangote Industries would bring significant ben­efits, including job creation, technology transfer and en­hanced industrial capacity. This potential investment aims to strengthen economic ties between Nigeria and Gabon and enhance Gabon's industrial capacity, with further discussions planned in the coming months to finalise the investment strategy.

Dangote said "We are excited about the opportunity to invest in Gabon. Our goal is to contribute to the country’s economic diversification and industrialisation efforts. By leveraging our expertise in cement production, we aim to support Gabon’s infrastructure sector."

Nigeria: The Joint Committee of the House of Representatives is investigating the sharp rise in cement prices in the country. Major industry players, including Dangote Cement and Lafarge Africa, must submit detailed production cost documents to justify the market price of cement. The committee plans to visit the production plants after reviewing these financial records to establish the cost of production and determine a fair price for cement. The inquiry covers production costs from 2020 to July 2024.

One committee member pointed out that Dangote Cement has continued to make significant profits despite sourcing most of its raw materials locally, and questioned why the price of cement keeps rising whilst producers continue to profit. In response, Dangote Cement’s Managing Director, Mr Arvind Pathack, attributed 95% of production costs to imports or foreign exchange impacts, noting significant increases in input costs and logistical challenges exacerbated by the poor state of infrastructure and foreign exchange limitations. The committee called for a review of company policies to potentially lower prices, criticising the Federal Competition and Consumer Protection Commission (FCCC)’s inactivity in addressing the pricing issue.

Chair of the Committee, Jonathan Gaza, said “We are extremely hopeful that this engagement will lead to a reduction in the price of cement. FCCPC has slept on their functions so far; their inactivity and unresponsiveness to price is what has put Nigeria where we are today.”

A battle over cement pricing in Ghana reached a new stage this week when the Chamber of Cement Manufacturers (COCMAG) hit back at proposed government regulation. Frédéric Albrecht, the chair of the association, told a meeting that about 80% of local production costs linked to cement manufacture are related to the local currency exchange rate. So fixing the price would do little to address the main cause behind rises.

Albrecht was speaking at a stakeholders’ forum organised by the Ghana Chamber of Construction. The group was convened to discuss the government’s proposed Ghana Standards Authority (Pricing of Cement) Regulations 2024 that were formally presented in the country’s parliament in early July 2024. The association argues that the cement sector has not been consulted properly over the proposal and that introducing it could have negative consequences for the construction sector as a whole. It says that imported clinker is subject to numerous taxes and that the average price of cement has actually lagged behind the rate of inflation.

The government is dealing with an economic crisis that forced it to default on its external debts in 2022 and ask the International Monetary Fund for support. This has led to depreciation of the local currency and high inflation. Around the same time the authorities have also been attempting to regulate the cement sector more closely. In 2022 the Ghana Standards Authority (GSA) took action against a brand of cement, Empire Cement, that appeared to be on sale without any of the required permits. Then in the autumn of 2023 the Ghana Revenue Authority (GRA) shut down Wan Heng Ghana’s grinding plant in Tema after the company failed to pay a major tax bill. Action by the GSA followed when it shut down three more plants in the Ashanti Region - Xin An Safe Cement Ghana, Kumasi Cement Ghana and Unicem Cement Ghana - for using inferior materials in cement production.

In April 2024 a nine-member committee was established to monitor and coordinate the local cement industry. Notably, cement producers have been required to register with the committee in order to secure a licence to manufacture cement. Kobina Tahir Hammond, the Trade and Indus¬try Minister, then said in late June 2024 that the government wanted to intervene in cement pricing to protect consumers from what he described as the ‘haphazard’ increment in cement prices by manufacturers. A legislative instrument doing just that was presented in parliament on 2 July 2024. Around the same time the GSA reportedly threatened to close down ‘several’ more cement plants for non-compliance.

The cement industry in Ghana is particularly vulnerable to currency exchange effects as it is dominated by grinding plants. One integrated cement plant, Savanna Diamond Cement, was launched in the north of the country in the mid 2010s. However, this compares to 14 licensed grinding plants in the country reported in the local media. This includes units run by Ciments de l’Afrique (CIMAF), Dangote Cement, Diamond Cement (WACEM) and Heidelberg Materials subsidiary Ghacem and its CBI Ghana joint-venture amongst others. This makes it one of the countries in Sub-Saharan Africa with the most grinding plants, along with places such as Mozambique and South Africa. When the Ministry of Trade and Industry started a consultation on regulating the cement sector in late 2023 it calculated that the country produced 7.2Mt of cement in 2021 and that the country had an overcapacity of 3.5Mt. This gives the country an estimated cement production capacity of just below 11Mt/yr.

Some sense of the growing costs that the cement sector in Ghana is facing can be seen in the Ghana Statistical Trade Report for 2023. Clinker was the country’s third biggest import by value at US$206m. It was only exceeded by diesel and other automotive oil products. The Ghana Statistical Service reported that most of the country’s imported clinker in 2023 came from Egypt, South Africa and its neighbours in West Africa. Both Dangote Cement and Heidelberg Materials flagged up the country’s economy as being hyperinflationary in their respective annual reports for 2023.

Argument and counter-argument over cement pricing is prevalent around the world especially in Africa. Fellow West African country Nigeria, for example, has endured plenty of very public dialogue and debate about the price of cement. In Ghana’s case it seems more likely than not that factors beyond the control of the local cement companies are driving the prices given the grinding-dominated nature of the sector with lots of different companies involved. Negative currency effects and inflation look more likely to be driving cement prices than anything else, although one should always be wary of the potential for cartel-like behaviour by cement producers. The economic crisis in Ghana certainly fits the bill for the conventional introduction of price controls on selected commodities but getting the fine tuning right could be difficult in practice. Fixed prices will reassure consumers in the short term provided supplies hold. Beyond this the actual causes of the high cement prices should emerge in time.