₦airaland Forum

Politically, North are very smart.
That's all I can say here.

Ayomide002:
Covid is actually not funny, the closest person to me, is in the isolation centre, the last time I saw him, I almost cried.

I saw some other people through the window in the isolation centre. Seriously, If you are still thinking there is no covid in Nigeria, then, you are a TERRORIST.

Still not get your point

I'm not in anyway in support of Yahoo Yahoo boys but say na only Yahoo Yahoo boys efcc go dey arrest ni?

These people that always talking of lockdown, how do they reasons self?

Me ooo I'm not taking

Cement manufacturers in Nigeria are an anomaly with regards to profitability, compared to most other established global producers of the centuries old building material, amid an outcry in the country over surging cement prices.

MoneyCentral analysed the financial statements of the 3 major cement manufacturers in Nigeria, Dangote Cement, Lafarge Africa and BUA cement, who together control 100 percent of the market, and compared it that of 7 other major global cement producers.

The data shows that the Nigerian cement firms have the highest profit margins in the world.

Ordinarily this would have been a good financial metric to get excited about but with the optics of ever rising cement prices in Nigeria, juxtaposed against producers with outsized profits, it can be rightly seen as a problem that needs addressing.

Profit margin is a measure of profitability calculated by finding the net profit at any given period as a percentage of the revenue.

In finance profit margin is important because it shows how much of every naira of revenue is flowing to the bottom line.

Nigerian cement manufacturers retain quite a huge chunk of their revenues as profits defying the trend seen in most other parts of the globe and in Africa itself.

Cement producers are generally high volume, low margins producers because of a number of reasons including the high energy costs of running cement plants, carbon emission taxes, and the commoditized nature of the product which is produced with often little innovation.

Dangote Cement, Nigeria’s largest company by market capitalization and the country’s biggest cement producer has production capacity of 45.6 million tonnes per year across ten countries in Sub-Saharan Africa.

The firm has integrated factories in seven countries, a clinker grinding plant in Cameroon and import and distribution facilities for bulk cement in Ghana and Sierra Leone. Together, these operations make it the largest cement producer in Sub-Saharan Africa.

Dangote’s Nigerian operations more profitable than Rest of Africa

MoneyCentral’s deep dive into the 245 pages long 2019 annual report of Dangote Cement shows that the Nigerian operations of the firm are more profitable than that of the Group as a whole, while its Pan African operations are less profitable than the consolidated Group operations.

In other words, Nigeria operations are the cash cow of Dangote cement and it is extremely profitable with Nigeria Alone profit margins of 45 percent as at year end 2019, compared to 23 percent for the Group as a whole and negative margins for Pan African operations.

Dangote cements Group revenue and results by reportable segment shows that Nigerian operations had revenues of N610.2 billion and profit after tax of N275.1 billion (equivalent to 45% profit margins).

Pan Africa operations reported a loss after tax of N85.29 billion on revenues of N282.7 billion leading to negative margins of -30 percent, while the Group (Nigeria plus Pan Africa) reported revenues of N891.67 billion and profits of N200.5 billion for a 23 percent profit margin.

For the most recent nine-month period ended 30 September, 2020 the Company generated revenues of N761.44 billion and net profits of N208.69 billion. The Groups Q3, 2020 profit margins were equivalent to 28.77 percent.

Lafarge Africa and BUA Cement

Nigeria’s two other major cement manufacturers Lafarge Africa and BUA cement also reported elevated profit margins compared to peers across the globe.

Lafarge’s profit margins as at year end 2019 was equivalent to 54 percent on revenues of N212.9 billion and net income of N115.1 billion. Lafarge had onetime gains from the disposal of its South African operations in the period.

BUA Cement also had high profit margins of 35.53 percent in 2019 and 33.9 percent as at Q3, 2020 respectively. Sales came in at N55.28 billion with net income of N18.74 billion reported for the Q3, 2020 period.

Profit margins of global cement manufacturers

MoneyCentral looked at the top cement manufacturers globally that have publicly available financial statements, analysed those statements and calculated the respective profit margins of the cement makers to compare against Nigerian peers (See table below).


The data shows that Nigerian cement manufacturers enjoy the highest profit margins in the world.

Analysis of the financial data from cement makers from North America (Cemex), Europe (Heidelberg Cement), China (Anhui Conch Cement Co), India (Ultra Tech Cement) and Indonesia (Sem Indonesia), shows that Nigerian cement makers are low volume high priced manufacturers, compared to their peers who are high volume low priced players.

Dangote Cement for instance which controls 64 percent of the Nigerian market is the lowest cement producer profiled among the group in terms of volume (14.1 million tons produced in Nigeria in 2019) but has the highest profit margins.

What causes high profit margins

There is a feeling in Nigeria that the concentration among the top three cement producers, who together dominate the entire market, combined with practically impossible barriers erected for new entrants are responsible for ever rising cement prices.

Profit margin, which is the ratio of profits to sales, is a key financial target for most firms. Companies often use their pricing strategy to generate their target profit margins.

Firms can then set prices to achieve these target margins, while remaining somewhat competitive in the market. However, if a company wants to compete on price alone, it must have a low enough cost structure and achieve sufficient sales volume to generate profits.

So the question will be, is there really something unique about Nigeria’s cement market or is something else going on?

Dangote Cement’s experience in its pan Africa operations shows that there may be some truth to allegations of excessive high pricing by the 3 Nigerian cement makers.

In South Africa where Dangote Cement’s sales numbers cannot be published due to local competition laws, annual sales volume for the firm in 2019 decreased by 9.4 percent year on year (y-o-y): “mainly due to low demand and increased competition from importers and blenders,” according to statements it made in its financials.

In other words, Dangote is acknowledging that more competition in the South African markets from imports led to lower sales.

Losses incurred in Dangote Cements Pan African operations suggests that pricing power is weaker overseas than at home in Nigeria.

Even at an EBITDA (Earnings Before Interests Taxes Depreciation and Amortization) level, margins for the Pan African operations were equivalent to 16.92 percent, compared to 59.1 percent for Nigerian operations alone, while the operating profit margin was just 1.41 percent for pan African operations, compared to 50.42 percent for Nigerian operations alone.

Little value added?

Critics claim that Nigerian cement manufacturers have added very little value to the economy over the years with their industry protected by Government and as such they are doing more harm than good to the Nigerian economy.

“Nigeria’s cement policy has been a complete failure,” said Feyi Fawehinmi, accountant, writer and social media influencer based in the U.K., and a strident critic of Nigerian governments cement policy.

“If you are going to have a policy supporting the production of an input (cement), the only sensible way to measure the success of that policy is to measure the things that input goes into (housing).”

Fawehinmi contends that Nigerian cement producers have not added any local innovation or research and development, to improve the body of cement knowledge that has been in existence for 2,000 years and hence should not be setting prices so high.

“All the technology used to manufacture cement in Nigeria is simply imported from China,” Fawehinmi said.

At MoneyCentral we would not quite go as far as to suggest little value addition by Nigerian cement firms.

Dangote Cement for instance supports many businesses that participate in the supply chain and help them thrive and build their own businesses.

The number of retailers and distributors in Dangote cement’s Nigerian distribution chain grew year-on-year, from 7,000 to 10,000, and from 568 to 685, respectively, representing a percentage growth of 43 percent and 21 percent for each category.

We also believe listing of the cement businesses by their owners (Dangote and BUA) make financial and corporate disclosures more transparent.

BUA Cement for its part is investing to increase its capacity by an additional 9 million metric tonnes per annum. The new capacity addition should take BUA to about 17 Million tonnes Per Annum in the Nigerian market. New addition of capacity should in theory bring prices down in a truly competitive market.

Nigerian cement manufacturers have also largely built their plants all in the past decade or so, helping them to tiptoe around legacy emissions issues being faced by older cement companies in the West.

“DCP plants have all been built in the last twelve years. They have been designed to be intrinsically efficient through the adoption of cutting edge technology in cement production,” Dangote Cement said in its 2019 financial statement.

The firms are also not immune from disruptions happening in the wider macro economy. Land exports for Dangote cement for instance reduced to 0.45Mt from 0.7Mt for the full year owing to the border closure in the last few months of 2019.

What can be done?

The Nigerian government evidently worried about high cement prices recently reached an agreement with cement manufacturers to charge discounted prices as part of its plan to construct 300,000 houses for low-income Nigerians, under the Economic Sustainability Plan (ESP).

The price of cement late last year touched a high of N4,100 per bag, a development that the government blamed on the #End SARs protests.

In Lagos at the time of filing this piece the price of cement hovers between N3,200 – N3,500 per bag, depending on the brand.

MoneyCentral’s enquiries from Ghana shows that the retail price of a bag of Dangote cement is 39.5 Ghana cedis, roughly $6.50 or N3,000, making it less expensive in Ghana than in Nigeria even though the market is supplied from Nigerian factories.

The solution to the problem inherently lies with cement pricing in Nigeria and how it is arrived at by manufacturers, middle-men and retailers.

The usual refrain likely to be heard about high cost of energy, poor road and transport infrastructure, high cost of capital and other costs hindering cement manufacturers, would only apply to any potential new entrants and not current cement manufacturers who have attained dominant position in the market, as can be seen by their ability to generate world beating profit margins.

In other words, even after taking into consideration total manufacturing costs of N379.9 billion (including fuel and power, salaries, plant maintenance and raw materials) incurred by Dangote Cement in 2019, the firm still managed to remain one of the most profitable cement firms in the world based on its pricing power.

To truly get cement prices to trend lower the Federal Government then needs to enforce competition in the sector.

That would entail an improvement in the anti-trust or competition laws of Nigeria, to enthrone true competition in the nations’ cement sector.

New entrants must also be encouraged with tax breaks while a cap or moratorium should be placed on tax breaks given to dominant and established cement names.

Finally, the Federal Government should consider removing barriers to importation of cement into Nigeria. As can be seen from the South African example, imports did help to bring prices down to the benefit of consumers.

https://www.google.com/amp/s/moneycentral.com.ng/fixed-income-bonds/article/nigerian-cement-manufacturers-have-worlds-highest-profit-margins/%3famp

TheRareGem1:
It is crystal clear that the VP want to serve Nigeria and impact the lives of Nigerians positively, his type of leader is rare, we have never had someone like him before.

Six and half year now as Nigeria vice president.

wink2015:
I think each state of assembly should legislate on the wearing of facemask instead of the federal government in Abuja meddling into state matters.

Everywhere in Lagos this morning, nobody put on facemask. Covid has come and gone. Their second wave no no no.

And some people get conscience and reason to tell me evil buhari is best thing to happened to them.

Nigeria government is a completely a joke.
With NINC registration ongoing
Buhari self.

bash8936:
Useless Afenifere...
Always quick to criticize tinubu on any small issue. Is it by force he says anything? The Governors have spoken is that not enough.

But you told us that he is the leader of Yorubans.
So, a leader should always speak for his people.
Good or bad.

I'm not in support of all these nonsense happening of recent.

Where is the photo to back it up.

Inec should pls issue PDP candidate the ticket

I knew it wouldn't work.
Nigeria population is a curse to us.
Till tomorrow, some people still dey born like dog.
Even here in Lagos.
You are living in one room face me I slap you with 3 handsome children all boys. And to feed them and pay utilities bills is a problem but only thing hungry you is a female child. And your wife get pregnant again.

Same Abacha Mr. Integrity told us he was not corrupt.
Those associating buhari name with the word integrity, do not know the meaning of integrity.

RedRay:
What about the bigger thieves....politicians?

Bigger, medium or small, they are all dsame.
Thief is a thief

It may be a movie set

There are a lot of poor people in my street here in Lagos.
A face me and I slap you NEPA bill monthly N7500. And you want to give them 5k and claim u have lifted 20 million people out of poverty?

miniziter:
You have not told us how many visitors you came with o. Sometimes, it is good to be proactive and be painted a wicked landlord than allowing shit to happen. Nigerian are fond of telling the world about the bad their landlord is doing but hide theirs under the carpet. Biko its not easy to build o.

Make we hear word pls.
Wetin he built that no one else has built before?

Malaria covid

See stupid talk.
What does this political rulers take us for?

Elxandre:
Nigerians can not read.

He's saying any malaria like symptom should be assumed to be covid for safety purposes. It doesn't mean test wouldn't be done to ascertain their condition.
No wonder we keep electing dullards.

Is there anybody in Nigeria who doesn't experience malaria related symptoms

27Pushing30:
A friend almost died after docs kept treating him for malaria rather than covid

Once the virus progresses to the lungs it becomes akin to a death sentence ...

My guy if you get malaria symptoms go get tested for covid first before even malaria

So if I have malaria, I have to carry out covid first?
But before covid19 there was malaria.

Before nkor, were not all malaria patients treated as covid19.
So, some people are surprised that Nigeria version of covid19 is malaria typhoid.

Nice words.
Major problem of Africans are their choice of leaders.
They are greedy, selfish

See as president look young and sound I mean Benin Republic president oooo.

cocolacec:
The present Nigeria of religious cultism you mean.

Lol
After all this arrangement we are discussing favor your potential candidates.
What do you have to say on Christian Christian ticket?

cocolacec:
We had Moshood Abiola and Babagana Kingible under SDP in 1992/1993.Muslim-Muslim ticket

Lol
I doubt if you are living in present Nigeria.

We already knew presidency were backing this Godforsaking group called Muslim Solidarity Forum.