Nigeria’s cement makers have discovered one thing higher than a monopoly: an oligopoly and with pricing energy.
Dangote Cement, BUA Cement and HBM Nigeria, the former Lafarge Africa, made N1.7trillion after tax in the 9 months to September, up 38% yr on yr.
No surprises, a bag reportedly sells for greater than N12,500. Revenues rose by a fifth to 1 / 4; prices didn’t maintain tempo.
The outcomes reward buyers who learn the footnotes.
Let’s begin with Dangote. Third-quarter revenue jumped 51% and the shares hit the 10% each day restrict with information of billionaire buyers, Otedola piling in. The headline was a “historic” swing to N51billion of web money however look nearer and the satan is in the particulars.
Plant lives had been stretched from 25 to 40 years, chopping depreciation by N47billion. In addition, N31billion of curiosity was capitalised, all of it in the third quarter. Strip each out and pre-tax development slows from 41.5% to a couple of third.
The web money determine leaves out N62billion of accrued curiosity, N25billion of leases and N269billion of capex financed by suppliers not but paid. Count them and Dangote owes roughly N300billion greater than it holds. Operating money stream of N1.8trillion included about N330billion collected from sister corporations. Of a N507billion present tax cost, solely N98billion has been paid.
None of that is sinister. Dangote halved its gross debt and nonetheless throws off extra cash than its rivals mixed. But at N1,420 the shares commerce on 17 instances trailing earnings, in opposition to 14 instances at the finish of September. Some of the rally is spillover from the Dangote refinery IPO. The sector’s low cost inventory is now not low cost.
BUA has the higher working story. Third-quarter gross sales rose 28.5% hitting and 9 months up 26.5%. Its nine-month EBITDA margin of 53% is the highest of the three, and bulk cement went from virtually nothing to N67billion of gross sales.
There are two catches. Firstly, its tax fee is 17%, half its friends’. At their 34%, earnings could be a fifth decrease and a 19 instances a number of would look extra like 24. Secondly, BUA paid N339billion in dividends out of N176billion of free money stream, borrowing the distinction. With a 2.3% free float, practically all of that money went to the chairman and BUA Industries.
HBM is the cautionary story as third-quarter gross sales fell 5% and revenue 15%. Management blames deliberate upkeep; upkeep prices did greater than double, which inserts. More putting is the dividend payout.
HBM paid N354billion, about 130% of final yr’s earnings, whereas money fell from N388billion to N103billion. Meanwhile, capex is operating at seven instances depreciation. A 6% dividend yield is beneficiant, however onerous to repeat at that tempo with out borrowing.
The larger query is 2027. HBM’s Sagamu and Ashaka expansions add 5.5Mt from the first quarter. Dangote’s 6Mt Itori plant follows, and BUA needs to go from 17Mt to 20Mt. That is about 14.5Mt, or practically 1 / 4 extra capability throughout the three. HBM is already recruiting well-capitalised distributors to take share.
Margins this fats not often survive that a lot new provide. Investors are paying 2026 costs for companies going through 2027’s capability.
