Forex crisis, inflation force up cement prices
Before recession, relative cement prices across the nation were around N1,400 and N1,800.
But since the forex crisis joined forces with recession, all local manufacturers have jerked up their prices citing cost of doing business as key factor.
Otherwise, the Cement Manufacturers Association of Nigeria (CMAN) have raised prices of brands by N600 per bag in factories, including additional N100 cost for haulage. This has increased retail prices from N1, 600 to N2, 300 depending on location. In some areas, prices have risen to N2, 350 or higher.
CMAN members include Dangote Cement Plc, which has emerged the market leader with factories in Gboko, Benue State; Obajana, Kogi State; and Ibeshe in Ogun State.
There is another leading producers, Lafarge Cement WAPCO Plc; Cement Company of Northern Nigeria Plc; Ashakacem Plc and Cross-River based United Cement Company.
Looking at the forces of forex crisis, recession and inflation which has reached about 18.2 per cent, top stakeholders say controlling the prices of cement cannot work now because companies are producing at heavy cost risks.
According to the Vice President of Nigerian Institute of Building (NIoB), Kunle Awobodu, he said “This is going to create crisis in the construction sector and bad blood between clients and contractors, as developers will make claims for fluctuations”.
“Invariably, it will lead to upward reviews of contract sums. New and on-going projects will be delayed until there is agreement on the contract variations. It can also expedite construction activities because of the anticipation of further increase.
Investigations also show that many manufacturers are now producing below capacity utilisation of their plants, due to disruptions in gas supply, unstable cost of Automotive Gasoline Oil (AGO), known as diesel, forex and general weakness in the economy.
The impacts of the scenario started showing on the cement companies results since the second quarter as many of them recorded serious drop in earnings.
Otherwise, a review of unaudited financial reports of many of the firms for the third quarter of 2016 revealed a struggle between balancing rising input cost pressures and passing the inflationary pressures on already constrained consumers by raising prices of some products during the period.
Looking at the reports filed with the Nigerian Stock Exchange (NSE),by Dangote Cement Plc on its result, it was clear that profit after tax for the third quarter was affected by its cost of sales it declined from N157.993 billion. It made in the comparable period of 2015, to end the current period with N133.521 billion.
The current struggle was indicated as the report indicated that Dangote Cement increased the revenue by N76.642 billion from N365.450 billion it made during the same period in 2015.
For Lafarge Africa Plc, the firm reported a loss after tax of N37.4 billion for the nine-month period ended September 30, 2016. The loss represents a 215 per cent decline from a profit after tax of N32.4 billion recorded in the corresponding period of 2015.
Lafarge has a net sale for the period reduced by 25 per cent to N161 billion in 2016 from N215 billion recorded in 2015. Cost of sales declined marginally to N142.9 billion from N143.3 billion, as selling and marketing expenses grew by 18 per cent to N3.9 billion from N3.3 billion. However, administration expenses was reduced by 14 per cent to N16.3 billion in 2016 from N19.1 billion expended one year ago.
Responding to the performance, Michel Puchercos, CEO of Lafarge Africa said: “Our focus on volume and prices started to deliver during the third quarter. In September, all our plants were running at record performance level, Mfamosing Line 2 started its operation on August 28 (clinker) and prices increased by N650 per bag in September representing about 40 per cent price change.