Dangote and BUA Cement Plc, Nigeria’s largest domestic cement sector operators, spent a whopping N238.437 billion on fuel and power in the first quarter (Q1) ending March 31, 2024. This sum represents a massive 199.64% increase over the N79.574 billion spent during the same time in 2023. Furthermore, it accounts for 46.36% of the overall cost of sales, which amounted to N514.349 trillion for cement manufacturers throughout the analyzed period.
The surge in fuel and power costs is attributed to the prevailing high inflationary environment in 2024, which has driven up the prices of goods and services across the nation. The unaudited Q1 results of the companies reveal that these cost escalations were compounded by factors such as the removal of fuel subsidies, exchange rate harmonization, and Naira depreciation.
Additionally, macroeconomic indicators, notably heightened average inflation in the domestic market, have contributed to the mounting challenges faced by cement manufacturers. In Nigeria, the inadequate state of the power grid infrastructure necessitates that manufacturers rely predominantly on self-generated power, further exacerbating their operational costs.
Despite nearly a decade passing since the privatization of the power sector, there has been scant progress in addressing the deficiencies in electricity supply for manufacturers. Consequently, they continue to bear the burden of significant costs associated with self-generation, hindering profitability and growth prospects.
Amidst these challenges, the profit after tax for both companies stood at N130.643 billion, reflecting a 4.15% decrease from the N136.301 billion recorded in 2023. The decline in profits can be attributed to the rising production cost of sales, primarily driven by increases in raw materials cost and energy expenses.
The escalating cost of sales has significantly impacted earnings, particularly amidst rising inflation and exchange rates. In 2024, the cost of sales for the firms surged to N514.349 billion, marking a notable growth of 134.17% from N219.648 billion in 2023.