Cement giants post strong FY’22 earnings

Cement giants in Nigeria have continued to maintain their strong earnings position in 2022, with Dangote Cement marking a notable 16.9 per cent growth in revenue and Lafarge WAPCO boasting a net income of 53.6 billion naira. Analysts at Vetiva Research are optimistic about the sector and anticipate good demand momentum throughout the year. Abigail Alabi, the Sub-Saharan Africa Industrial Goods Analyst at Vetiva, recently joined CNBC Africa to provide insights into the impressive financial performances of these industry leaders. Lafarge WAPCO, though trailing behind Dangote Cement in terms of market leadership, has made significant strides in the past two years. By de-bottlenecking the Ewe Korona Shaka plant and enhancing capacity, the company has amplified its production volumes. Moreover, favorable cement pricing dynamics have fuelled revenue growth, positioning Lafarge WAPCO for heightened success. On the other hand, Dangote Cement remains a dominant player in the market but faced challenges with declining volumes attributed to gas disruptions. To combat this, Dangote Cement is exploring alternative energy sources to optimize costs and mitigate the impact of rising diesel prices on production expenses. The commissioning of alternative fuel feed at their plants signifies a strategic move towards a more sustainable energy mix. Despite a modest 3% growth in the previous year, key drivers like pre-election infrastructure spending and robust cement pricing policies have catalyzed growth for cement players. Looking ahead, the industry is expected to maintain elevated cement prices due to prevalent inflationary pressures and heightened production costs. While some margin sacrifices might occur in the short term to stimulate demand, the long-term outlook is optimistic. As political uncertainties subside, cement producers are likely to regain pricing power and capitalize on enhanced production capacities to drive growth. In terms of international operations, Dangote Cement has showcased resilience in markets like Ghana and stands to benefit from infrastructural developments across Africa. Markets like Kenya hold immense potential for expansion, given the ongoing infrastructure projects underway. Nigeria currently leads in terms of contribution to profits; however, as infrastructural investments gain momentum in other African countries, Dangote Cement is poised to witness diversification in revenue sources. The market valuation of Lafarge WAPCO suggests undervaluation, attracting investor interest and pointing towards potential price appreciation. Investors have shown confidence in Dangote Cement, expecting strong results and dividend payouts. Both companies present attractive opportunities for investors, with promising growth prospects in the flourishing cement industry.