How Energy Costs Are Driving Up Price of Cement as Dangote, BUA Spend N174.5 Billion on Fuel and Power
- Dangote and BUA cement are lamenting the cost of production bordering on energy costs which have seen them spend billions.
- The companies cumulatively spent about N174 billion on the cost of fuel and power in the first half of 2022
- The companies said these costs had seriously impacted their profit as inflation also erodes profits
Nigeria's two leading cement manufacturers said they spent about N173.537 billion on fuel and power in the half year ended June 30, 2o22, representing a 38.34 per cent increase from N125.44 billion recorded in the same period last year.
The increase represents 41.33 per cent of the total cost of sales of N419.965 billion recorded by the companies during the period being reviewed.
Source: Getty Images
Naira depreciation affecting profit margin
Nairametrics reports that these were contained in their unaudited financial records.
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The pressures came due to the fall of the naira, while others were a result of inflation, especially in the domestic market where inflation was strongly felt.
Manufacturers are yet to reap the benefits of privatisation of the power sector as improvement in electricity supply has continued to be elusive, forcing them to depend heavily on the alternative power supply at a great cost.
Experts say improved power is one of the most critical infrastructures to strengthen the manufacturing sector and job creation.
There is fear that the recent increase in inflation, which stands at 19.64 per cent as of July, according to the Nigeria Bureau of Statistics (NBS), will lead to more pressure on manufacturers, especially on gas and raw materials.
The blow of inflation on cost of production
The two cement manufacturers recorded a profit after tax of N233.668 billion from N235.025 billion in 2021, a 0.7 per cent decline.
The decline was caused by the increasing cost of sales which consumed their earnings as inflation bites.
The company sales cost was N419.965 billion for the half year 2022 as against N342.275 billion in 2021, accounting for a growth of 22.7%.
The CEO of Dangote Cement, Michael Puchercos, said that substantial energy and fuel costs negatively impact the production and supply chain costs.
BUA cement stated that it is considering a capital increase for capacity expansion of its Cement plants in Sokoto State which will increase from 2.0 million metric tons to 8.0 metric tons annually.
Cement price to increase further as BUA nlames Dangote, Lafarge, others for high cost as they rake in N1.4trn
Legit.ng reported that the price of cement could increase further in the coming months as the Chairman and Chief Executive Officer of BUA Group, Abdul Samad Rabiu contemplates an upward review of cement prices.
Rabiu revealed this over the weekend to state house media after the group's team met with President Muhammadu Buhari, according to the Punch daily.
According to him, his company increased cement output and reduced prices by 10% per bag, but he was unable to gain the backing of other cement makers, who he blamed for the high cost of the product in the country.
Source: Legit.ng
