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Wednesday, February 1, 2023

Inflation Surge: Dangote And BUA Cement Spend N263 Billion on Gasoline And Electricity In Nine Months.

Dangote Cement Plc and BUA Cement Plc has incurred staggering fuel and electricity expenditures of N263.157 billion, During the nine months concluded circle on September 30, 2022. This is an increase of N44.31% from the N182.355 billion reported during the same time in 2021.

Additionally, the amount equals 42% of the N626.660 billion in total cost of sales that the cement companies reported during the time period under consideration. The naira’s depreciation and macroeconomic inflationary pressure, particularly in the domestic market where average inflation increased, were to blame for some of these cost pressures.

Regardless of the high cost of sales which swallowed much of the companies’ earnings and stood at N626.660 billion, they both managed to generate a combined profit after tax of N287.115 billion, according to data tracked by Nairametrics.

Nigerian manufacturers are yet to witness appreciable improvement in electricity supply years after Nigeria’s power sector was privatised. As a result, they are forced to generate their electricity for themselves, albeit at very high costs. Power constitutes the single most critical infrastructure needed to boost the manufacturing sector and create jobs. 

Breakdown of the analysis  

  • A closer look at the financials shows that Dangote Cement consumed fuel and power valued at N198 billion during the nine months as against N141.750 billion in 2021, representing an increase of 39.79%. Profit after tax declined by 23.41% to N213.101 billion for the period as against N278.250 billion in 2021. The cost of sales grew by 19.94% to N483.831 billion from N403.388 billion. 
  • On the other hand, BUA Cement spent N65.005 billion on energy in the nine months under review, representing an increase of 60.09% over N40.605 billion reported during the period ended September 2021. Profit after tax was N74.014 billion in 2022 as against N65.906 billion in 2021, accounting for an increase of 12.30% while the cost of sales stood at N142.829 billion during the period under review from N99.654 billion in 2021, representing a growth of 43.32%. 

Comments of Dangote Cement CEO  

  • The Chief Executive Officer of Dangote Cement, Michel Puchercos, while commenting on the third quarter results explained that “to mitigate the impact of the significant increase in energy and AGO costs, we are strengthening our efforts to ramp up the usage of alternative fuels.
  • “So far this year, we have co-processed 101,553 tonnes of waste, representing a 77% increase in 2021. We are on track to commission our alternative fuel feed system at Obajana lines I and V, and Ibese line II in November. In addition, we are ramping up our investment in compressed natural gas, CNG, to reduce our AGO usage.” 
  • He further explained that the company recorded an increase in revenue of N1,177.3 billion, up 15.2% compared to last year. 

Comments of BUA CEO 

  • The Chief Executive Officer of BUA Cement, Mr Yusuf Binji, said during a conference call that the cement maker has resorted to the use of locally sourced coal and liquefied natural gas in favour of imported coal, in its efforts to withstand the stress in the foreign exchange market. 

Comments of BUA corporate affairs manager 

  • The corporate affairs manager of BUA Cement, Mr O’tega Ogra, in a report cited by Nairametrics, said: “BUA Cement’s switch to LNG at our Sokoto plant was a strategic decision done for efficiency gains and to reduce our foreign exposure on coal imports since LNG can be sourced locally. 
  • “We started the conversion of the plant last year and it is now completed. BUA Cement’s Sokoto plant now runs on locally sourced coal and LNG rather than the previous mix of local and foreign-sourced coal and LPFO. LNG will also be used to power engines used in generating electricity and will replace LPFO and AGO. 
  • “Additionally, the use of LNG will reduce our carbon footprint and conserve the environment in line with our commitment to environmental sustainability and the Paris Accord of which Nigeria is a signatory.” 

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