MIXED HALF-YEAR RESULTS FOR DANGOTE CEMENT

Dangote Cement, Africa’s largest cement
manufacturer, continued to experience a slowdown in performance at home in
Nigeria and other key African markets such as Ethiopia and South Africa in the
first half of this year, but recorded remarkable improvement in Tanzania.

The group’s half-year revenues declined by 3% to
$1.2 billion from $1.3 billion during the same period in 2018, largely blamed
on lower volumes and net average prices in Nigeria.

The cement maker’s pan-African operations posted a
2.7% rise in sales to 4.7 million tonnes, up from 4.6 million tonnes over the
same period in 2018. The total pan-African volumes represented 38.2% of group
sales volumes.

But the group operating profit declined by 15% to
$464.6 million, from $546.5 million in 2018, due to the depreciation of the
Nigerian naira.

“Our variable costs continue to be affected by
foreign exchange effects, and higher fuel and distribution costs,” said Dangote
Group chief executive Joe Makoju.

Dangote, however, tripled its market share in
Tanzania to 22% from 7% last year, after resolving operational challenges that
resulted in a significant rise in sales.

The company is emerging as a key beneficiary of the
fall of some of its regional competitors such as ARM Cement (Athi River Mining)
and Tanzania’s move to block cement imports from Kenya, over contentions on the
source of raw materials used in its manufacturing.

In Tanzania, Dangote Cement, which in September
2018 started running its Mtwara plant on gas instead of coal, posted a 172%
rise in cement sales to 543,000 tonnes in the first half of 2019 compared with
200,000 tonnes in the same period last year.

“We saw a stronger performance in Tanzania, which
is now running on gas turbines. Our higher volumes were supported by higher
prices across the market as demand rose across the country, particularly the
southern region,” said Makoju.

The switch to gas was a significant turnaround in
terms of saving costs and uninterrupted production, with uptake driven by the
government’s vast investments in infrastructure projects that are driving
construction activity. These include the Dar es Salaam-Morogoro railway, the
Kenya-Tanzania railway, major road and bridge projects and commercial housing.

In the first half of 2018, Dangote was forced to
suspend operations in its Mtwara plant due to high cost of fuel for the diesel
generators after the Tanzanian government banned importation of coal from South
Africa.

In Ethiopia, electricity rationing and shortage of
foreign currency resulted in a decline in sales to 945,000 tonnes in the first
half of this year, from the 973,000 tonnes sold in the same period in 2018,
with its market share in the country stagnating at 21%.

The plant got only 50% of the power normally needed
for full production, a scenario that significantly impacted both volumes and
margins.

“In general, the cement market in Ethiopia is
driven by demand for large government infrastructure projects. However,
shortages of foreign exchange are impacting infrastructure projects as well as
dampening general economic activity,” said the company.

Dangote is however optimistic that the rains which
have begun to normalise water levels in the country’s hydroelectric power
cascade coupled by improvement in transport logistics, increase in use of local
coal and the commissioning of a new cement bags factory could result in a rise
in sales in the second half.

Dangote holds nearly 46 million tonnes capacity of
cement across 10 countries in Africa. Nigeria, where its production capacity
stands at 29 million tonnes, remains it flagship market, accounting for over 60%
of sales. 

Across the region, cement companies are
experiencing tough times.

Kenya: ARM is in administration while Bamburi
Cement’s profit for the first half of this year shrank substantially to $2.8
million from $11.4 million in 2018. East Africa Portland Cement Company is on
its knees.

Rwanda: Loss-making Cimerwa is already on the market, with the government, which owns 49% stake, eager to sell it off.https://www.theeastafrican.co.ke/business/Mixed-half-year-results-for-Dangote-Cement/2560-5257282-ipvc3x/index.html