Dangote Cement staged a major one day rally on Monday after it gained a whopping 9.7% to close at N134.9 per share. This essentially sent the All share index gaining at a 13 day high of 2%. Investors who bought Dangote Cement when it when it hit N123 should be smiling to the bank. When gains like these occurs it is always important to ask why?
Why the Pop?
We dug around and believe this was due to a huge piece of news that filtered in over the weekend. Dangote Cement has said that it is planning to expand yet again. The company said it was planning to build new cement plants in Edo and Ogun state increasing local production capacity to 38.25 metric tonnes per year from 29.25 metric tonnes.
According to Thisday, the new plants are expected to add 9 million metric tonnes per annum (mmtpa) to the company’s current local output of 29.25mmtpa, raising it to a total 38.25mmtpa. The company stated that the communities in which it is setting up the new plants are Okpella in the northern part of Edo State and Itori in Ogun State. They also reported that the new investments will also lower the cost of production, bring about a future reduction in the price of cement, and generate employment opportunities for youths of the host communities.
The Group Managing Director and CEO of Dangote Cement Plc, Mr. Edwin Devakumar said this about their plans to expand;
“Nigeria was an import-dependent country in terms of cement in the past, so if we do not add capacity, we will not be able to match the growing rate of consumption in the country. We want to ensure that we are always one step ahead to meet local demand for the commodity,”
Dangote Cement share price opened trading Tuesday 6.7% down indicating that this may have just been a bull trap. Investors have finished digesting the news and have come back to reality.