Dangote Cement Plc and BUA Cement Plc spent a whopping sum of N173.537 billion in fuel and power during the half year ended June 30, 2022, a 38.34 per cent increment from N125.44 billion recorded during the comparable period of 2021.
This represents 41.33 per cent of the total cost of sales of N419.965 billion recorded by the cement firms during the period under review.
This was contained in the unaudited half year results of both companies tracked by Nairametrics. Some of these cost pressures were due to the depreciation of the Naira while others were due to macro-economic inflationary pressure, especially in the domestic market where average inflation heightened.
After years of privatisation of the power sector, manufacturers are yet to see any appreciable improvement in electricity supply, forcing them to rely heavily on in-house power supply at huge cost. Yet, power constitutes the single critical infrastructure to boost the manufacturing sector and create jobs.
Inflation rate increased to 18.60 per cent as at end of June 2022, the highest in 11 months due to increased food costs, supply chain disruptions, the depreciation of the naira, insecurity, and deteriorating infrastructure.
With the headline inflation rate for July 2022 released on Monday by the National Bureau of Statistics (NBS) which stood at 19.64 per cent a 2.27 per cent points higher compared to the rate recorded in July 2021 which was (17.38 per cent), there is fear that the surge may lead to more cost pressure on manufacturers, especially on gas and other raw materials.
According to data tracked by Nairametrics, profit after tax of these companies stood at N233.668 billion from N235.026 billion in 2021 representing a marginal 0.7 per cent decrease. This was due to the rising cost of sales which swallowed much of the earnings following rising inflation and high exchange rate.
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Cost of sales for the firms stood at N419.965 billion for the half year 2022 as against N342.275 billion in 2021, accounting for a growth of 22.7 per cent.
A cursory look at the financials showed that Dangote Cement consumed fuel and power valued at N129 billion during the half year 2022 as against N98.978 billion in 2021 representing a growth of 31.3 per cent. Following high cost of sales, Profit after tax declined by 10.19 per cent to N172.104 billion for the half year 2022 as against N191.630 billion in 2021. Cost of sales grew by 16.78 per cent to N322.461 billion from N276.115 billion.
BUA Cement spent N43.580 billion on energy in H1 2022, representing an increase of 64.66 per cent over N26.446 billion reported in H1 2021. Profit after tax was N61.364 billion in 2022 as against N43.396 billion in 2021, accounting for an increase of 41.4 per cent while cost of sales stood at N97.504 billion in half year of 2022 from N66.158 billion in 2021, representing a growth of 47.38 per cent.
