Dangote Cement's sales growth remains robust with Nigerian vollumes up 15 per cent in July and August. However, in the current quarter, the company has seen disruption to the gas supply, its preferred fuel in Nigeria. This has led to a substantial hike in its fuel costs as the company increasingly relies on LPFO and, to a lesser extent, on coal as prices for these alternatives are up to three times higher. The significant devaluation of the naira against the US dollar has also contributed to the company's rising costs.
To reduce the impact of these costs Dangote announced the ex-factory price of cement by NGN600 (US$1.90), with prices returning to the level seen before the company announced a price decrease in September 2015. Moreover, it has accelerated the installation of coal mills and the coal mining initiative in Nigeria. The cement producer expects to mine its own coal from November onwards. Most of Dangote's Nigerian lines are now able to run on coal, effectively nearly eliminating the plants' reliance on imported coal, gas and LFPO.
"These are challenging times for Nigeria and for Dangote Cement but we are taking strong actions that will position the company for continuing success. Our coal mining initiative will benefit both the company and the Nigerian economy by reducing the need for foreign exchange and helping us to both protect existing jobs and create new ones," said Onne van der Weijde, CEO of Dangote Cement.
