Dangote Cement, one of Nigeria’s leading cement companies, has revealed that it expended a total of N56.7 billion on fuel and power costs in the first quarter of 2023, marking the highest expenditure in seven years.
According to a recent analysis by BusinessDay, fuel and power expenses accounted for 34.6 percent of Dangote Cement’s total cost of sales, which amounted to N163.7 billion during the first three months of this year.
Further examination of the company’s operating expenses showed that N56.7 billion was allocated to fuel and power, N48.2 billion to raw materials consumed, N23.7 billion to depreciation and amortization, and N13.6 billion to plant maintenance costs.
Moreover, Dangote Cement allocated N11.9 billion to salaries and related staff costs, with an additional N11.3 billion dedicated to other production expenses. The company also paid N760 million in royalties.
In the first quarter of 2023, Dangote Cement experienced a 6.2 percent increase in production cost of sales, reaching N163.67 billion compared to N154.1 billion in the preceding period.
During the same period, the company’s operating expenses, adjusted for depreciation, rose by 13.6 percent to N82.2 billion from N71.06 billion in the first quarter of 2022.
Administrative expenses for Dangote Cement reached N18.68 billion in the first three months of 2023, representing a 10.3 percent rise compared to N16.93 billion in the corresponding period of 2022.
Selling and distribution expenses also saw an increase, rising by 13 percent to N68.72 billion in the first quarter of 2023, compared to N60.69 billion in the same period of the previous year.
Although Dangote Cement’s profit after tax experienced a slight growth of 3.4 percent, reaching N109.5 billion in the first quarter of this year from N105.85 billion in the same period of 2022, the company’s revenue declined to N406.7 billion, a 1.6 percent decrease from N413.18 billion in the first quarter of 2022.
Mustapha Umaru, an analyst at CSL Research, attributed the decline in revenue to reduced production levels and the company’s ongoing struggles with supply chain challenges. However, analysts at ARM Research anticipate robust revenue growth in the future, expecting a sales volume boost in the second half of 2023 as economic activities recover from cash scarcity and election uncertainties.
Dangote Cement witnessed a 13.5 percent decline in group sales volume, which dropped to 6.3 million tonnes in the first three months of 2023 compared to 7.2 million tonnes in 2022.
Arvind Pathak, CEO of Dangote Cement, explained that the decrease in volume was due to a cash crunch and uncertainties surrounding the general elections, leading to a slowdown in key private and public infrastructure investments.
While the company’s finance costs decreased by 11.6 percent to N36.8 billion in the first quarter of this year, finance income grew marginally by 1.1 percent to N10.47 billion. Dangote Cement’s net finance cost also dropped by 16.5 percent to N22.05 billion in the first quarter of 2023, compared to N26.41 billion in the same period of 2022.
Additionally, the company’s other income increased by 45.2 percent to N1.48 billion in the first quarter ofshowing significant growth from N1.02 billion in the first quarter of 2022.
Dangote Cement’s profit from operating activities amounted to N156.9 billion in the first quarter of 2023, indicating a 14 percent decline from N182.8 billion in the same period of 2022.
Net cash generated from operating activities reached N115.7 billion in the first quarter of 2023, down from N213.1 billion in the first quarter of 2022.
The company’s net cash used in investing activities amounted to N72 billion, a decrease from the negative cash flow of N255.7 billion reported year-on-year.
Furthermore, Dangote Cement’s net cash used in financing activities showed a positive cash flow of N57.2 billion in the first quarter of this year, a significant improvement from the negative cash flow of N91.5 billion during the same period in 2022.
At the end of the period, Dangote Cement’s cash and cash equivalents amounted to N248.5 billion, reflecting a remarkable growth of 96 percent from N126.8 billion.
Earnings per share for the company stood at N6.44 per share in the first quarter of 2023, compared to N6.18 per share in the first quarter of 2022.
Dangote Cement reported its highest energy costs in seven years, with N57 billion spent on fuel and power in the first quarter of 2023. Despite challenges such as supply chain issues and a decline in revenue, the company remains optimistic about future growth prospects, expecting increased sales volume and improved economic conditions in the coming months.