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Nigeria’s cement makers have found something better than a monopoly: an oligopoly and with pricing power.
Dangote Cement, BUA Cement and HBM Nigeria, the former Lafarge Africa, made N1.7trillion after tax in the nine months to September, up 38% year on year.
No surprises, a bag reportedly sells for more than N12,500. Revenues rose by a fifth to a quarter; costs did not keep pace.
The results reward investors who read the footnotes.
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Let’s start with Dangote. Third-quarter profit jumped 51% and the shares hit the 10% daily limit with news of billionaire investors, Otedola piling in. The headline was a “historic” swing to N51billion of net cash but look closer and the devil is in the details.
Plant lives were stretched from 25 to 40 years, cutting depreciation by N47billion. In addition, N31billion of interest was capitalised, all of it in the third quarter. Strip both out and pre-tax growth slows from 41.5% to about a third.
The net cash figure leaves out N62billion of accrued interest, N25billion of leases and N269billion of capex financed by suppliers not yet paid. Count them and Dangote owes roughly N300billion more than it holds. Operating cash flow of N1.8trillion included about N330billion collected from sister companies. Of a N507billion current tax charge, only N98billion has been paid.
None of this is sinister. Dangote halved its gross debt and still throws off more cash than its rivals combined. But at N1,420 the shares trade on 17 times trailing earnings, against 14 times at the end of September. Some of the rally is spillover from the Dangote refinery IPO. The sector’s cheap stock is no longer cheap.
BUA has the better operating story. Third-quarter sales rose 28.5% hitting and 9 months up 26.5%. Its nine-month EBITDA margin of 53% is the highest of the three, and bulk cement went from almost nothing to N67billion of sales.
There are two catches. Firstly, its tax rate is 17%, half its peers’. At their 34%, earnings would be a fifth lower and a 19 times multiple would look more like 24. Secondly, BUA paid N339billion in dividends out of N176billion of free cash flow, borrowing the difference. With a 2.3% free float, nearly all of that cash went to the chairman and BUA Industries.
HBM is the cautionary tale as third-quarter sales fell 5% and profit 15%. Management blames planned maintenance; maintenance costs did more than double, which fits. More striking is the dividend payout.
HBM paid N354billion, about 130% of last year’s earnings, while cash fell from N388billion to N103billion. Meanwhile, capex is running at seven times depreciation. A 6% dividend yield is generous, but hard to repeat at that pace without borrowing.
The bigger question is 2027. HBM’s Sagamu and Ashaka expansions add 5.5Mt from the first quarter. Dangote’s 6Mt Itori plant follows, and BUA wants to go from 17Mt to 20Mt. That is about 14.5Mt, or nearly a quarter more capacity across the three. HBM is already recruiting well-capitalised distributors to take share.
Margins this fat rarely survive that much new supply. Investors are paying 2026 prices for businesses facing 2027’s capacity.
