Dangote Cement bets on strategic projects to power growth

Despite weaker cement demand across Africa, Dangote Cement Plc is doubling down on strategic investments that analysts say will anchor medium-term growth and profitability.

A new report by CardinalStone Research highlights that while short-term pressures persist, especially in Pan-African operations, key projects and operational efficiencies are laying the foundation.

The company’s ongoing capital investments, including a 3 million metric tonnes per annum (MTPA) grinding unit in Ivory Coast and the rollout of additional compressed natural gas (CNG) trucks, are set to redefine its cost structure and improve capacity utilization.

“These projects are expected to dovetail into improved gross margins and robust returns on assets and equity in the coming years.”

“We expect CAPEX intensity to be 8.0 percent (vs. 12.0 percent in FY’24), reflecting less aggressive expansion plans. However, the rollout of 1,500 new CNG-powered trucks and the completion of the alternative fuel system in Tanzania remain focal in FY’25,” the report noted.

These strategic plans, the company said, have already started yielding dividends. Haulage costs fell by 1.1 percent year-on-year in Q1’25, with gross margins hitting 59.1 percent, compared to 54.0 percent in FY’24.

“These efficiency gains are part of a broader plan to embed energy cost optimization into the company’s DNA,” analysts at CardinalStone said.

Read also: Dangote Cement EBITDA crosses N1trn mark

In addition to the grinding unit in Ivory Coast, Dangote Cement is also working on two major capacity expansion projects expected to be completed by 2028. These include the Itori plant in Ogun State and the expansion of the Mugher cement plant in Ethiopia, which will double the latter’s output to 5Mt.

“These long-term investments, backed by strong operating cash flows, position DANGCEM to not only meet debt obligations and dividend commitments but also drive regional cement demand recovery,” the report added.

Volume and Pricing Outlook

In Q1’25, Dangote Cement’s total sales volume declined 6.7 percent year-on-year to 6.8 million tonnes, mainly driven by weakness in its Pan-African operations. Volumes fell 10 percent in that region, as countries like Ethiopia, South Africa, and Senegal battled with policy delays, economic uncertainties, and project pipeline disruptions.

Nigeria was not spared either. Domestic volumes declined 4.3 percent to 4.4 million tonnes amid reduced private sector demand due to high prices, insecurity, and intense competition.

The report added that Dangote Cement is expected to offset this with increased pricing, particularly in Nigeria.

“We project revenue per tonne in Nigeria to settle at N161,200—30 percent higher than last year’s level, driven by strong price increases and sustained infrastructure demand,” the report stated.

CardinalStone analysts, however, caution that the weak private sector demand and insecurity in Nigeria’s North Central could weigh on overall volumes. Still, government infrastructure projects under the Renewed Hope initiative could provide a lifeline through the public sector.

Resilient Margins and Profitability

With strategic cost-saving initiatives and declining financial leverage, Dangote Cement’s profitability profile is on the mend. Margins improved significantly in Q1’25, with EBIT margins rising to 40.0 percent from 32.2 percent in FY’24, while PAT margins are projected to hit 20.7 percent for FY’25.

“Reduced foreign exchange losses, efficient debt management, and stable FX conditions will help maintain this momentum,” the report noted, citing the settlement of the N100 billion bond and plans to clear a N50.3 billion parent-company loan.