Dangote, Other Cement Giants Incur N3.64trn Production Costs Despite Revenue Growth
Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology, Banking and the Economy.
Due to rising inflation and the weakening of the naira, which made foreign exchange more expensive, Nigeria’s top cement companies spent about N3.64 trillion on production costs in 2024.
This marks a 72% increase from the N2.12 trillion recorded in 2023.
The key cement producers—Dangote Cement Plc, Lafarge Africa Plc, and BUA Cement Plc—saw a significant rise in expenses, including production costs, administrative expenses, and distribution costs.
Financial reports for the year ending December 31, 2024, showed that Dangote Cement spent an estimated N2.48 trillion on these costs, a 65.9% increase from N1.5 trillion in 2023.
Source: UGC
Production costs alone rose to N1.65 trillion in 2024 from N1.01 trillion in 2023, while operating expenses (OPEX) jumped from N491.64 billion to N839.2 billion.
BUA Cement reported N641.13 billion in production, administrative, and distribution costs for 2024, which is a 102% increase from N317.41 billion in 2023.
Lafarge Africa recorded N510.62 billion in total costs for 2024, a 67.7% increase compared to N304.4 billion in 2023.
Drivers of high cost of production
One major reason for the high production costs was rising inflation, which made raw materials and other essential goods more expensive.
Nigeria’s inflation rate reached its highest level in nearly 30 years, hitting 34.8% in December 2024, up slightly from 34.6% in November. On average, inflation for the year stood at 33.2%, a sharp rise from 24.7% in 2023.
The falling value of the naira also made cement production costlier. By the end of 2024, the official exchange rate was N1,535 per dollar, showing a 40.9% drop from N907.11 per dollar in 2023.
In the parallel market, the naira weakened by 26.8%, trading at N1,660 per dollar, down from N1,215 per dollar at the end of 2023.
In addition, policies in the oil & gas sector affected energy costs. Dangote Cement spent N679.94 billion on fuel and power in 2024, a big jump from N399.21 billion in 2023.
However, recent operational reports from top companies in the sector show a significant increase in sales volumes across all major producers in Nigeria.
Dangote, BUA, and Lafarge increase revenue, profits
Despite economic difficulties, Nigeria’s top cement producers—Dangote Cement, BUA Cement, and Lafarge Africa—generated a total revenue of N5.15 trillion in 2024, a 68% increase from N3.07 trillion in 2023. Dangote Cement accounted for 69.4% of this revenue.
Dangote Cement’s revenue grew by 62.2% to N3.58 trillion, driven by higher sales volume and price adjustments due to inflation.
The company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) crossed the N1 trillion mark for the first time, reaching N1.38 trillion. Profit after tax (PAT) rose by 10.5%, totalling N503.2 billion.
BUA Cement saw its revenue almost double, increasing from N460 billion in 2023 to N876.5 billion in 2024.
The company also recorded a profit before tax of N99.6 billion, up from N67.2 billion, while profit after tax increased slightly to N73.9 billion, compared to N69.5 billion in 2023.
This growth happened despite a slow start to the year and a tough economic environment.
Source: UGC
Lafarge Africa reported a profit after tax of N100.1 billion for 2024, which is a 96% increase from N51.1 billion in 2023. The company’s revenue also grew significantly, rising 72% from N405.5 billion in 2023 to N696.8 billion in 2024.
Cement price reduction can increase sales
As much as the cement companies are smiling to the bank, experts have concluded that price reduction will earn them even more sales.
Speaking with Legit.ng, Dr Ifeanyi Ubah, Head of Research at Commercio Partners, a Lagos-based investment firm, listed what the companies must do to achieve this.
He said:
"To reduce cement prices and enhance affordability, Nigerian cement companies must optimize local raw material sourcing to cut import reliance and forex exposure. Investing in alternative energy sources, such as gas and renewables, can lower production costs.
"Enhancing distribution efficiency and reducing middlemen can also curb price inflation. Government incentives, such as tax reliefs and infrastructure support, can further ease costs."
He added that boosting production capacity through new plants and technological upgrades can increase supply, stabilizing prices in the long run.
FG urges cement producers to slash prices
In related news, Legit.ng reported that the Minister of Works, Dave Umahi, has directed cement manufacturers to reduce the price of cement to N7,000 per bag.
He pointed to the new exchange rate and the drop in petrol prices as factors that have lowered production costs for manufacturers.
Umahi gave the manufacturers seven days to comply or risk being reported to President Bola Tinubu.
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Source: Legit.ng
