Price hike, sales volume drive Nigeria cement giants’ topline growth

Nigeria's cement industry has seen a surge in topline growth in 2024, with major players like BUA, Lafarge, and Dangote Cement reporting improved results driven by record-high sales volumes and price adjustments. However, cost pressures remain a significant challenge for the industry, primarily due to elevated energy costs and increased haulage expenses. Abigail Alabi, Industrial Goods Analyst for Sub-Saharan Africa at Vetiva, highlighted the key factors impacting the sector's financial performance in a recent interview with CNBC Africa. The mix of increased sales volumes and price hikes has driven revenue growth for cement makers in Nigeria. Both BUA and Lafarge experienced a surge in price per tonne and an uptick in volumes. Despite the top-line growth, cost pressures have strained profitability margins for these players. One of the major cost drivers is the volatility in oil prices, leading to higher gas costs for cement production. Additionally, currency fluctuations have impacted the cost of raw materials due to import dependencies. Finance costs have also surged, with Dangote Cement and Lafarge facing challenges from FX-dominated loans and high-interest environments. The sector has also grappled with rising haulage expenses, stemming from increased diesel prices. Distribution costs have soared, putting pressure on margins for cement companies. Despite the challenges, industry players are actively implementing cost-saving measures to address the financial strain. Cement makers are exploring alternative fuel sources and optimizing industrial waste to reduce fossil fuel reliance in production. Initiatives like using CNG trucks for distribution are gaining traction as a cost-effective alternative to diesel. Dangote Cement and Lafarge have incorporated CNG trucks into their fleets to mitigate haulage expenses. These strategies are expected to yield long-term cost efficiencies for the industry. Looking ahead to 2025, cement volumes are poised to increase, driven by the government's boosted infrastructure spending and CAPEX allocation. However, the industry is cautiously optimistic about the implementation of CAPEX projects, considering historical trends of suboptimal utilization. The ability of the federal government to balance fiscal constraints and effectively execute infrastructure projects will be pivotal in driving demand for cement. While higher CAPEX implementation could lead to a surge in cement volumes, there are risks associated with fiscal constraints and debt servicing that may hinder progress. Overall, the Nigerian cement industry remains optimistic about the potential for growth in 2025, supported by cost-saving initiatives and increased infrastructure investments.