Cement industry tax rises by 9.95% as Dangote, BUA, Lafarge pay N174bn in Q3

By Chukwuma Umeorah

Nigeria’s leading cement manufacturers, Dangote Cement Plc, BUA Cement Plc, and Lafarge Africa Plc, listed on the Nigerian Exchange Limited (NGX), collectively paid N174.32 billion in taxes for the third quarter of 2024. This represents a 9.95% increase from the N158.54 billion paid in the corresponding period of 2023. Their combined revenues within the period under review exceeded N3.62 trillion. Despite mounting operational challenges linked to inflation, foreign exchange (FX) losses, and rising production costs, which have affected the bottom line of these cement companies, this notable tax contribution underscores the sector’s expanding role in national revenue generation.

Companies are required by law to remit tax income to state and federal government agencies, among other agencies where they operate. Aside from paying the statutory rate of 30% of total profit as the company’s income tax (for companies with over N100 million turnover), there are other taxes, including the tertiary education tax, National Information Technology Development Agency (NITDA) Tax, and Nigeria Police Trust Fund Levy.

Data available from the unaudited 9-month reports and regulatory filings for 2024 by these companies on the NGX showed that Dangote Cement, the industry leader, emerged as the largest contributor, with a tax payment of N127.29 billion for the quarter, up 5.19% from the N121.01 billion paid in Q3 2023.

The company’s revenue surged by 69.5% year-on-year (YoY) to an unprecedented N2.56 trillion, driven by strong demand for cement across Nigeria and West Africa. Its profit before tax (PBT) stood at N406.39 billion, while its after-tax profit was N279.10 billion.

Despite this revenue growth, Dangote’s profit margins faced pressure due to a sharp increase in its production costs, which rose to N1.24 trillion, representing a 93% jump from the same period last year. Finance costs further eroded profitability, ballooning to N451.22 billion as a result of foreign exchange losses tied to Nigeria’s currency devaluation. However, Dangote Cement’s commitment to operational expansion is evident in its total assets of N5.54 trillion, cementing its position as a dominant player in the region.

Commenting on their performance for the period under review, its Group Chief Executive Officer, Arvind Pathak, said, “Our financial results for the nine-month period demonstrate superior performance across key metrics, as we diligently execute our strategic priorities for the year.

Group volumes grew by 1.9% YoY to 20.7Mt, largely due to a significant rebound in Nigeria. This growth was supported by promotional activities and enhanced route-to-market solutions, which helped mitigate the impact of adverse weather conditions. Despite the challenges of elevated inflation, high borrowing costs, and further currency depreciation that characterized the nine-month period, our business showed remarkable resilience. I am pleased with the company’s overall performance, as key financial indicators are showing positive trends. Leveraging our robust export-to-import strategy.”

On his part, BUA Cement reported a tax payment of N2.78 billion, marking an 18.50% decline from the N15.68 billion paid in Q3 2023. This reduction aligned with its dip in profit after tax (PAT), which fell from N85.75 billion last year to N61.75 billion in 2024, despite a robust revenue increase of 73.6% to N583.41 billion.

The company’s rising operational and finance costs were major contributors to the drop in profits. Production costs nearly doubled to N402.59 billion, and finance costs soared to N17.37 billion due to FX losses.

While these pressures weighed heavily on profitability, BUA continued to expand its asset base, which rose by 27.8% year-on-year to N1.56 trillion, reflecting investments in production capacity and infrastructure aimed at meeting growing market demand.

For Lafarge Africa, the third-largest cement producer listed on the Exchange, paid N34.25 billion in taxes for Q3 2024. This represents a 56.76% increase from the N21.85 billion paid in the same quarter last year. This increase was reflected in the company’s substantial PBT growth, which rose to N94.33 billion from N61.16 billion in Q3 2023. Lafarge’s revenue for the period reached N479.50 billion, up by 65.9% YoY, while gross profit climbed to N237.77 billion, underscoring its operational efficiency amidst rising costs.

The company’s production costs surged to N241.73 billion, reflecting inflationary pressures and heightened energy expenses, but these were effectively managed to preserve margins. Lafarge’s total assets grew by 15.9% from the corresponding year to N810.24 billion, driven by strategic investments in plant and equipment.

The collective tax contributions of these cement giants underscore their critical role in Nigeria’s fiscal framework while highlighting the industry’s resilience despite prevailing challenges. With combined revenues surpassing N3.62 trillion for the quarter, the figures reflect sustained demand for cement, driven by ongoing infrastructure projects and urbanization trends. However, experts caution that persistent macroeconomic pressures could weigh heavily on these companies’ profitability, potentially affecting their capacity to declare dividends to shareholders for the financial year.

Commenting on the broader implications, Vice-President of Highcap Securities Limited, David Adnori, emphasized that listed companies have historically demonstrated stronger profitability, which translates to significant tax contributions to government revenue, urging more companies to come into the market.

He noted that reluctance among some companies to list on the Exchange often stems from a lack of financial transparency. “Collaborative efforts between the government and the Federal Inland Revenue Service (FIRS) to enforce tax compliance could drive more companies to the capital market, enhancing corporate governance and boosting tax revenues,” he stated. This, he believed, would contribute to increased economic growth and development.

From their financial records, Daily Sun gathered that while each company was pursuing aggressive investments to scale operations and secure long-term growth, the short-term trade-offs between profitability and expansion were becoming increasingly evident. Their commitment to asset development suggests confidence in the future of Nigeria’s construction sector, but the rising costs of production and finance pose questions about the sustainability of their current profit trajectories.