Full-year results from Dangote Cement show the company has been outperforming growth in its domestic market of Nigeria as new capacity boosts market share.
With a number of new projects scheduled for completion this year both on the home front and across the sub-Sahara Africa region, the emerging cement major is targeting 60Mta of production, grinding and import capacity by 2016.
On Wednesday the company delivered its 2013 financial review highlighting that revenues rose by 22.4 per cent, backed by strong growth in Nigerian volumes. While the total domestic cement market grew by 15.6 per cent to nearly 21.2Mt, Dangote managed even better growth of 28.2 per cent to 13.3Mt. The company’s market share is estimated to have been 62.8 per cent for the year, helped by increasing demand for direct-to-customer deliveries, which accounted for more than half of sales.
Tracking Nigerian demand trends over recent years, the company highlighted that domestic cement shipments have increased at a YoY average of 10.6 per cent since January 2011. Dangote’s growth rate has been double that average, with volumes rising by 20.9 per cent with new capacity boosting market share.
Going forward, it believes Nigeria’s strong economic growth and its commitment to improving infrastructure and housing make it an attractive long-term market for cement. The construction of large-scale industrial sites, such as the oil refinery proposed by Dangote Industries, are also set to generate additional demand for cement in the coming years.
Update on African projects
Dangote Cement is well underway with its breathtaking expansion programme with plans to increase its footprint to 13 African countries. It currently has 20.25Mta of capacity in Nigeria from its three plants and targets 60Mta of total cement capacity across the sub-Saharan region over the next two years.
Exane BNP Paribas highlight that Dangote's strategy is focussed on a "two-pronged" approach. In West Africa, the group hopes to use its integrated production plants in Nigeria, Senegal and Congo Rep to supply the local markets in addition to exporting any clinker surpluses to its grinding stations and import terminals in Sierra Leone, Liberia, Cote d'Ivoire, Ghana and Cameroon. This contrasts the strategy for east and South Africa, where the group is building integrated production plants with a view to supplying local markets exclusively.
2014 scheduled completions
In Nigeria, Dangote Cement will add 9Mta of new capacity by the end of 2014, comprising 3Mta at its flagship Obajana works and a further 6Mta from two lines at the Ibese plant. Last year it also commissioned extra capacity at Gboko through the introduction of higher-capacity grinding mills and debottlenecking of the plant.
Elsewhere, the group is scheduled to bring five plants and one terminal to completion this year. Sephaku Cement’s 1.1Mta Lichtenburg (Aganang) plant in South Africa is scheduled to be in production by mid-2014 and follows the commissioning of the Delmas grinding plant which entered into service last January.
The opening of the company's 1.5Mta plant in Senegal has been delayed by claims on land where the plant is situated. However, Dangote Cement has said the parties in question have reached an amicable out-of-court settlement and work on the plant site has since resumed. Operations are expected begin in 1H14.
Building work is also progressing on the 1.5Mta grinding works in Cameroon which is due for commissioning in summer 2014. The 2.5Mta Mugher greenfield plant in Ethiopia and the 1.5Mta Ndola works in Zambia are also expected to begin production in 2H14.??Work in Sierra Leone on an import terminal has been delayed and operations are expected to commence in the final quarter of this year.
2015 and beyond
Work has been delayed slightly on the 1.5Mta grinding facility in Cote d’Ivoire, but Dangote expects this plant to become operational in 2Q15. In Tanzania, work has begun on a 3Mta plant at Mtwara which is forecast to be operational in late 2015. The 1.5Mta Congo plant is scheduled for completion the year after.
Meanwhile in Kenya, the company is reviewing the possibility of increasing the scale of its proposed factory from 1.5Mta to 3Mta. In South Sudan Dangote has put its plans on hold owing to the unfavourable political and conflict situation that exists in the country at present. In Liberia it is reviewing its plans, currently for an import terminal, and exploring whether a larger grinding facility would be a more attractive investment.