The sales price of Dangote Cement is 17.22% cheaper on average when compared to prices set by global cement manufacturing giants from Cemex of Mexico to Holcim in Europe, research by MoneyCentral shows.
The data suggests any opening up of borders to importation will not lead to lower prices but would decimate local manufacturing jobs.
MoneyCentral looked at financial data from six of the world’s largest cement manufacturers from 5 continents: including Cemex of Mexico/USA, Dangote Cement of Nigeria, Holcim Ltd based in Europe, Anhui Conch of China, Votorantim Cimentos of Brasil and UltraTech Cement Limited India.
It showed an average sales price during 2022 for cement of $90.61 per metric ton for the group. This compares with Dangote Cement which sold its cement 17.22% cheaper at an average of $75 per metric ton (see chart).
However when compared to global cement manufacturing peers, Dangote Cement is at a disadvantage in nearly all metrics that is vital to profitable cement manufacturing, including finance costs, inflation, cement volumes and sales price.
The only major advantage MoneyCentral saw for Dangote Cement was lower energy costs and efficiency of cement plants due to its investment in newer and more energy efficient plants across Africa.
Some of the global peers such as Holcim have domestic subsidiaries in Dangote Cements operating locations, meaning the subsidiaries can tap the expertise, cheaper source of capital, of their global parent company, all while being in direct competition with Dangote Cement, a luxury Dangote Cement does not have.
Our thesis is simple: opening the floodgates of cement importation will not lower Nigeria Cement prices as the major global cement manufacturers currently sell their products at a price point higher than Dangote Cement.
It is however, more likely that given additional costs of shipping, port handling, demurrage, naira devaluation and haulage from ports on the coast to the hinterlands, prices will rise steeply just as we currently see with petrol, another fully imported commodity.
However there would be lost jobs, lower taxes for the Federal Government (FG), negative impact on the domestic stock market, less innovation and lost manufacturing activity in the country if unbridled importation were to occur.
Cemex average sales price for cement during 2022 was $114.30 per metric ton.
For the year ended December 31, 2022, Cemex had net sales of $15.6 billion, which were higher than those for the year ended December 31, 2021, mainly driven by price increases across its products and services in all of the regions where it operated from.
During 2022, Cemex pricing and cost mitigation efforts were able to offset much of the impact of inflation.
“As of December 31, 2022, 77% of our total debt plus other financial obligations was Dollar denominated, 13% was Euro-denominated, 2% was Pound Sterling-denominated, 5% was Mexican Peso denominated, 2% was Philippine Peso-denominated and 1% was denominated in other currencies,” Cemex said in its financials.
Chief Financial Officer Maher Al-Haffar said the company would keep pushing forward with price increases in 2023.
“More than 80% of our volume is being repriced in the early part of the year and we think there is very good traction,” Al-Haffar said in a call with analysts earlier in the year.
Takeaway: Cemex raised prices in 2022, to mitigate impact of inflation and will continue to raise prices this year.
Dangote Cement also can’t afford cheaper USD financing like Cemex due to extreme volatility of Naira vs dollar, such mismatch is risky because it will need to service dollar debt with revenues generated in Naira which becomes much more expensive in the event of a devaluation.
Cemex sold 63.4 million metric tons of cement in 2022.
Dangote Cement (Nigeria, Africa)
Dangote Cement’s average sales price for cement during 2022 was $75.5 per metric ton.
In 2022, Ethiopia one of Dangote Cements geographic locations of operations showed characteristics which indicates the existence of hyperinflation.
Dangote Industries (Ethiopia) Plc is one of the subsidiaries of Dangote Cement Plc and accounts for ?103.3 billion (6%), ?33.3 billion (6%) and ?270.6 billion (10%) of the Group’s revenue, profit before tax and total assets respectively.
Takeaway: Dangote Cement deals with high inflation not just in Nigeria but in rest of Africa
The only variable it controls is efficiency as macro variables such as inflation, interest rates, energy costs, and even pricing (due to competition) is largely outside its control. Cost of sales as a percentage of revenue is lowest for Dangote Cement due to massive investment in brand new plants across Africa (see chart).
However, the firm has one of the lowest prices, combined with the highest inflation and finance costs among the peers.
Average sales price during 2022 for Dangote cement was N58,282 per metric ton or $75.5 per metric ton, when using the most recent I&E rate of N772/$.
Dangote Cement sold 27.76 million metric tons of cement in 2022.
Holcim (Switzerland, Europe)
Holcim average sales price for cement during 2022 was $96.87 per metric ton.
The harmonised index of consumer prices (HICP) rose to 9.2% in 2022 for the EU, compared to 2021’s annual value of 2.9%.
The EU Innovation Fund granted Holcim two awards for carbon capture projects in Germany and Poland, for a total of EUR 328 million.
Net sales reached a record CHF 29,189 million for the full year of 2022, up by 12.9 percent on a like-for-like basis compared to the prior year. The record net sales were driven by strong pricing across all segments.
The Africa and Middle East region delivered a strong positive price over cost displaying resilience to inflation, especially with high energy costs.
“Strong domestic cement demand in Egypt, Iraq and Nigeria and higher exports mainly from Algeria and United Arab Emirates supported the net sales growth offsetting lower demand in Kenya,” Holcim said.
Takeaway: Holcim raised prices to mitigate the impact of inflation on energy, electricity costs. It also took advantage of low cost subsidized financing from the European Union.
The Swiss-based cement manufacturer Holcim sold over 190 million metric tons of cement in 2022.
Anhui Conch (China)
Anhui Conch average sales price for cement during 2022 was $46 per metric ton.
The firm in its financials noted that continued sluggish market demand combined with the increase in supply has resulted in a high open price of cement and then close low during the year, with energy prices such as coal price rising sharply which drove up costs.
“Against the background of rising costs, the efficiency of the cement industry has declined,” it said.
Takeaway: Despite being one of the largest cement manufacturers in the world, the firm needed high prices to offset rising energy costs.
Anhui Conch sold over 310 million metric tons of cement in 2022.
Votorantim Cimentos (Brazil)
Votorantim Cimentos average sales price for cement during 2022 was $143.9 per metric ton.
“We ended 2022 with net revenue of R$25.8 billion (16% higher than 2021), primarily due to price management that mitigated the slight decrease of volumes and the negative effect of the appreciation of the real in our operations abroad,” the firm said in its financials.
The EBITDA Margin in 2022 was 19%, compared to 24% in the previous year, due to the inflationary impacts of the international environment on the company’s costs.
Takeaway: Producer inflation is a major problem for cement firms globally, which they are dealing with by raising prices.
Votorantim Cimentos sold 36.8 million metric tons of cement in 2022.
UltraTech Cement Limited (India)
UltraTech Cement average sales price for cement during 2022 was $67.6 per metric ton.
India had average inflation of 6.7% in 2022, which was beneficial for UltraTech Cement as its finance costs as a percentage of revenues was equivalent to a low 1.79%, according to its financials.
UltraTech Cement sold 94 million metric tons of cement in 2022.