Nigeria’s largest conglomerate, Dangote Group, has spent a staggering N1.398 trillion as cost of sales in 2023 across its three quoted companies on the Nigerian Exchange Limited, representing a significant increase of 27.09% from the previous year.
The information is contained in the audited full-year results of the companies tracked by Nairametrics. The companies under review and mostly owned by Africa’s richest man, Alhaji Aliko Dangote and this includes Dangote Cement Plc, Dangote Sugar Plc, and Nascon Allied Industries Plc.
This increase in the cost of sales is attributed to inflationary pressures and the depreciation of the Naira. The amount spent also represents 51.21% of the total revenue of N2.730 trillion recorded by the firms during the period under review from N2.080 trillion in 2022.
It is important to note that Dangote Group is a major player in the Nigerian economy, with more than 30,000 people in direct employment. As such, the group’s financial performance has a significant impact on various value chains linked to its operations, including suppliers, distributors, and other stakeholders.
The latest inflation report released by the National Bureau of Statistics (NBS) showed Nigeria’s inflation rate for January 2024 surged to 29.90%, marking a significant increase from the 28.92% recorded in the preceding month.
The data reveals a notable uptick in the headline inflation rate for January 2024 by 0.98% points when juxtaposed with December 2023’s figures.
Delving into a year-on-year comparison, the inflation rate for January 2023 stood at 21.82%, showcasing a considerable leap of 8.08% points by January 2024, underscoring an escalated headline inflation rate over the same period in the preceding year.
Moreover, a closer examination on a month-on-month basis illustrates that the headline inflation rate for January 2024 ascended to 2.64%, outpacing the 2.29% observed in December 2023 by 0.35% points.
The inflationary pressures within the core category were most pronounced in the costs associated with passenger transport by road, medical services, actual and imputed rentals for housing, pharmaceutical products, accommodation services, and passenger transport by air, among others.
These areas witnessed the highest price increases, reflecting the broad-based nature of inflationary pressures beyond the food and energy sectors.
There is fear that the surge may lead to more cost pressure on manufacturers, especially on gas and other raw materials. To mitigate this risk, most cement manufacturers increased prices.
There is apprehension that the rising inflation may lead to more cost pressure on manufacturers, especially on raw materials costs. For example, the amount spent on raw materials stood at N606.224 billion from N483.294 billion in 2022, accounting for 25.44%. This also represents 43.36% of the total cost of sales of N1.398 trillion recorded by these companies in the 2023 financial year.
Following the high cost of production occasioned by rising inflation, Ravindra Singhvi, Chief Executive Officer of Dangote Sugar Refinery Plc, said that Dangote Sugar achieved commendable results despite difficult operating conditions characterised by rising inflation, currency devaluation, and strained consumer incomes.
Singhvi noted that PAT came in at (N73.8 billion), owing to a non-cash foreign exchange loss of N172.2 billion. Excluding the non-cash foreign exchange loss, recurring PAT was up 73.8%, at N98.4 billion.
In its investor presentation for nine months ended September 2023, Dangote Cement cited a slowdown in operation with the group volumes down by 2.4% to 20.3Mt, owing to election uncertainty, cash unavailability, and FX devaluation impacting Nigeria volumes.
The group however stated that 9M revenues for the Nigeria operations rose 4.8% to N933.1 billion on price increase to match the accelerating inflationary environment.
Arvind Pathak, Chief Executive Officer, Dangote Cement Plc commenting on the 2023 full-year audited report said that despite the challenging macroeconomic conditions, 2023 was yet another testament to the effectiveness of our diversification strategy.