The rise in the price of cement in the current year reflected on the profitability of the three listed center companies as they posted N356.2 billion profit after tax in nine months.
Since the beginning of the year, a bag of cement has hovered between N3,800 and N4,000 and it’s likely to rise to N4,500 by year end.
Dangote Cement, BUA Cement and Lafarge Africa who were the three listed cement firms on the Nigerian Stock market posted profit ion the back of higher volume and price adjustments of cement products.
The trio reported a combined N356.228 billion in net profit for the period between January and September 30, 2021, translating to a 33.40 per cent increase when compared to the N267.039 billion reported in the corresponding period in 2020.
Dangote Cement posted a net profit of N278.250 billion in Q3, 2021, higher from N208.685 billion posted in 2020, representing a growth of 33.33 per cent.
BUA Cement profit after tax grew by 23.2 per cent to N65.906 billion from N53.487 billion in 2020, while Lafarge Africa net profit up by 148 per cent from N4.867 billion in 2020 to N12.072 billion in 2021.
Cement price has increased in the first quarter of the year relative to what it was sold last year. The price now ranges from N3,800 to N4,000 per bag as against N2,600 to N3000 per bag (50kg) last year.
Also, there is a high demand for the products given the strong rebound in cement demand following the impact of the pandemic in 2020.
Speaking on the cement sector’s performance, the chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion, said, with a population of about 200 million people and a population growth rate of approximately three per cent per annum, the demand for and consumption of cement is expected to increase.
He also noted that increased government infrastructural projects and maintenance, coupled with urbanisation growth, would likely drive the growth of the market, saying, the demand for cement is driven by infrastructure, commercial and residential real estate development.
He added that, government, especially, at the federal level, is usually the major driver of cement demand in Nigeria with an estimated 50 per cent of total cement consumption.
Omordion pointed out that the cement industry will post an impressive performance in 2021, driven by the recovery of the Nigerian economy and faster global economic growth.
Vice president, Highcap Securities Limited, Mr. David Adnori said, these companies have intrinsic fundamentals on investment based on their contribution to construction sector.
He, however, said, the marginal increase in prices of cement tends to inflate inflation, saying, the profits declared by these companies will not only impact on investment in their stocks but on the economy general as it introduced inflation to the cost of building materials which is expected to escalate the cost of construction.
The CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the marginal increase in price of cement impacted on these companies’ profit declaration in the period under review.
He stressed that these companies will surpasses 2020 performance, given demands by the governments and domestic use of the products.
Analysts at Cordros Securities Limited said: “we expect demand for cement to remain healthy in the last quarter of the year, supported by increasing housing infrastructure by individual homebuilders even as government accelerates spending on capital projects given slightly improved public finances.”