Energy expenses for Nigeria’s leading cement manufacturers surged to ₦1.12trn in the full year of 2024, representing a sharp 87.41 per cent increase from ₦598.14bn recorded in 2023, as the industry continues to grapple with inflationary pressures and foreign exchange volatility.
The jump in energy expenditure — one of the most significant components of production costs — placed mounting pressure on manufacturers’ profit margins, even as companies like Dangote Cement Plc, BUA Cement Plc, and Lafarge Africa Plc recorded strong revenue growth and earnings for the year.
Data compiled from audited and unaudited financial statements of the three companies by THE WHISTLER showed that energy costs alone accounted for 21.75 per cent of the sector’s total industry revenue of ₦5.15trn in 2024, up from ₦3.06trn in 2023.
More significantly, energy expenses represented a staggering 43.64 per cent of the ₦2.57trn total cost of sales incurred by the companies.
The rise in costs was largely attributed to persistent inflation, continued depreciation of the naira, and broader macroeconomic challenges, including the removal of fuel subsidies and the unification of the foreign exchange market.
These factors sharply increased the cost of imported inputs and energy sources, most of which are priced in foreign currencies.
Despite these headwinds, the three cement giants managed to grow their topline, although at the expense of significantly higher operational costs.
Dangote Cement Plc, the largest cement producer in Sub-Saharan Africa, reported a profit before tax of ₦732.54bn for the year ended December 31, 2024 — up 32.44 per cent from the previous year. Its revenue grew by 62.16 per cent year-on-year to ₦3.58tn, primarily driven by domestic sales of cement and clinker.
However, its cost of sales rose even faster, climbing 63.32 per cent from ₦1.01tn to ₦1.64tn, representing 45.89 per cent of total revenue.
BUA Cement Plc saw its revenue nearly double to ₦876.5bn in 2024 from ₦460bn in 2023, despite experiencing a sluggish start due to backlogs and pricing challenges. Profit before tax grew to ₦99.6bn, while profit after tax inched up to ₦73.9bn.
The company’s cost of sales, driven by rising energy and raw material costs, consumed 65.74 per cent of total revenue — the highest among the three firms.
Lafarge Africa Plc posted a profit after tax of ₦100.1bn, up 96 per cent from ₦51.1bn recorded in 2023. Revenue increased by 72 per cent to ₦696.8bn. However, its cost of sales also surged, rising 76 per cent to ₦350.05bn — accounting for 50.24 per cent of revenue.
Commenting on the impact of forex and energy costs, BUA Cement Managing Director Yusuf Binji noted that the continued depreciation of the naira significantly influenced both operational and financing costs.
“Despite the slow start to the year, our quality and support offerings continue to endear us to customers, enabling us to surpass our 2023 volume and achieve a record high,” he said.
He added that the company had implemented strategic cost-saving measures expected to yield positive outcomes in 2025.
Dangote Cement’s Group Managing Director, Arvind Pathak, acknowledged the increasingly challenging operating environment but pointed to the group’s strategic response, including the adoption of alternative fuels and a robust export strategy.
“By leveraging our strong export-to-import strategy, we achieved record shipments to Ghana and Cameroon, boosting exports by 69.1 per cent,” Pathak said. He noted that 11 alternative fuel feed systems have now been installed across the company’s plants, raising its Thermal Substitution Rate to 10 per cent.
While the cement sector demonstrated resilience in revenue generation, analysts warn that sustained profitability in 2025 will depend on how well manufacturers manage escalating costs, especially those related to energy and imported inputs.
With the naira remaining volatile and inflation elevated, energy costs are expected to stay high. The ability of firms to innovate, diversify energy sources, and enhance operational efficiency will be critical to defending margins in the months ahead.